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Digital Markets, Competition and Consumers Bill (Thirteenth sitting)

Debated on Tuesday 4 July 2023

The Committee consisted of the following Members:

Chairs: Rushanara Ali, Mr Philip Hollobone, Steve McCabe, † Dame Maria Miller

† Carter, Andy (Warrington South) (Con)

† Coyle, Neil (Bermondsey and Old Southwark) (Lab)

† Davies-Jones, Alex (Pontypridd) (Lab)

Dowd, Peter (Bootle) (Lab)

Firth, Anna (Southend West) (Con)

Ford, Vicky (Chelmsford) (Con)

Foy, Mary Kelly (City of Durham) (Lab)

† Hollinrake, Kevin (Parliamentary Under-Secretary of State for Business and Trade)

† Malhotra, Seema (Feltham and Heston) (Lab/Co-op)

† Mayhew, Jerome (Broadland) (Con)

† Mishra, Navendu (Stockport) (Lab)

† Russell, Dean (Watford) (Con)

Scully, Paul (Parliamentary Under-Secretary of State for Science, Innovation and Technology)

† Stevenson, Jane (Wolverhampton North East) (Con)

† Thomson, Richard (Gordon) (SNP)

† Watling, Giles (Clacton) (Con)

† Wood, Mike (Dudley South) (Con)

Kevin Maddison, John-Paul Flaherty, Bradley Albrow, Committee Clerks

† attended the Committee

Public Bill Committee

Tuesday 4 July 2023

(Afternoon)

[Dame Maria Miller in the Chair]

Digital Markets, Competition and Consumers Bill

Ordered,

That the Order of the Committee of 13 June be varied by the omission of paragraph 1(h).—(Mike Wood.)

That is a good way to start our session.

Clause 225

Rights of redress: further provision

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss that clause 226 and 227 stand part.

It is a pleasure to serve with you in the Chair, Dame Maria. Clause 225 enables the Secretary of State to make new regulations for consumers to have a right to unwind, a right to discount and a right to damages. The regulations may cover, among other things, how such rights are to be exercised and when damages are to be payable. Before these regulations are made, the existing private redress provisions set out in the Consumer Protection from Unfair Trading Regulations 2008 will continue to apply. The first use of the power will be subject to the affirmative procedure, ensuring appropriate parliamentary scrutiny.

Clause 226 sets out how consumers can exercise their right to redress and allows consumers to undertake civil court action. Any legal claim must be brought within the time limit for simple contracts that applies under the Limitation Act 1980. If successful, a consumer will then have the right to unwind, the right to a discount, or the right to damages.

Clause 227 outlines the relationship between consumers’ private redress rights and other claims that are related to the prohibited practices of misleading actions and aggressive practices. It states that a consumer is not prevented from pursuing a claim under a rule of law, equity, or other legislation, but they cannot recover compensation twice for the same conduct.

It is a pleasure to serve under your chairship today, Dame Maria. I thank the Minister for his opening remarks. He covered how clause 225 confers a power on the Secretary of State to make regulations providing rights of redress to consumers, including the right to unwind relevant contracts, receive a discount, receive damages and so on.

The Opposition support the clause and recognise the need for further provisions for rights of redress, but why is that being left to secondary legislation? Does the Minister know when the Secretary of State may exercise this power? There is a danger of further delay. Why is this a power, rather than a duty? Perhaps the Minister can come back on why it was decided that the legislation be set out in this way. I can understand that there may be some reason to allow for further provision, but one would have thought that some measures would be brought in earlier.

Clause 226 sets out how a consumer can enforce their rights to redress, and I thank the Minister for his comments on it. Specifically, it sets out how a consumer with the right to redress by virtue of the regulations would be able to enforce their rights through making a claim in the civil courts. In Scotland, proceedings could be brought before the sheriff or the Court of Session. We welcome this clause in ensuring consumers have swift access to means of redress.

We also support clause 227, which would have the effect of avoiding double compensation, which is a common-sense and welcome provision.

For the avoidance of doubt, if anybody wants to remove their jacket, please feel free to do so. It is a little muggy in here.

I am very grateful. I have just a couple of points. Obviously, no gap will occur because of this, because the existing provisions are still effective until the provisions are replaced by any provisions made by the regulations. The reason for doing it like that is to create more flexibility around different measures that might need to be introduced. The world of consumers, consumer behaviour and activity providing services for consumers and goods is changing rapidly, so it makes sense to take a more flexible approach.

Question put and agreed to.

Clause 225 accordingly ordered to stand part of the Bill.

Clauses 226 and 227 ordered to stand part of the Bill.

Clause 228

Inertia selling

Question proposed, That the clause stand part of the Bill.

Clause 228 protects consumers against inertia selling, which occurs when traders send unsolicited products to consumers and then demand payment for the products or that the products be returned or safely stored. The clause provides clarity for consumers and traders, leaving no room for doubt. Consumers are exempt from any obligation to pay for the unrequested products, return them or store them safely. The lack of a response by a consumer to a trader does not mean that the consumer has agreed to pay for, return or store the product.

The Minister has laid out the reasons for this clause, which we very much support. It is important to support consumers against inertia selling, and it is a real worry when we hear of cases where traders demand an immediate or deferred payment for the return or even the safekeeping of products that have been supplied but not solicited by the consumer. It is important that we clarify that consumers are not required to pay for products supplied unsolicited by the trader, so we support the clause.

Question put and agreed to.

Clause 228 accordingly ordered to stand part of the Bill.

Clause 229

Offences

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Government amendments 72 and 73.

Clause 230 stand part.

Government amendments 74 to 77.

Clauses 231 to 233 stand part.

Clause 229 sets out that it is a criminal offence for a trader to engage in a commercial practice that involves any of the following: misleading actions, misleading omissions, aggressive practices, any of the practices in the list of banned practices in schedule 18, save for those expressly excepted, and/or knowingly or recklessly engaging in a commercial practice that contravenes the requirements of professional diligence.

Clause 230 describes the defences that may be available to defendants charged with offences under clause 229. These are a defence of due diligence and an innocent publication defence. To avail of the due diligence defence, a defendant must prove that the offence was due to the act or omission of a third party or information provided by a third party. The innocent publication defence is available, in certain circumstances, to a defendant charged with a relevant offence that is alleged to have been committed by the publication of an advertisement.

Government amendments 72 and 73 preserve the current effect of existing consumer law by excluding contraventions of the requirements of professional diligence from the offences to which these defences apply.

Clause 231 sets out the rules on liability when a trader commits an offence as a result of an act or omission by another person, and when a body corporate commits an offence. It is a restatement of the same provision in the Consumer Protection from Unfair Trading Regulations 2008, or CPRs.

Government amendments 74 to 77 preserve the current effect of the CPRs. This means that contraventions of professional diligence are excluded from the offences to which the criminal liability of others applies.

Clause 232 sets out the penalty for offences. It is a restatement of the same provision from the CPRs.

Clause 233 sets out the time limit for prosecution. This is within three years of the offence taking place, or within one year of the discovery of the offence by the prosecutor, whichever is earlier. The time limit is the same as set out in the CPRs and enforcers will be familiar with their application.

I hope that the Committee will support Government amendments 72 to 77 and clauses 229 to 233.

Clause 229 introduces provisions setting out the conditions under which it would be a criminal offence for a trader to engage in an unfair commercial practice of a kind prohibited by clause 217. The Minister outlined what those practices would be: a misleading action, a misleading omission, omission of material information from an invitation to purchase, and so on. The clause also makes every practice listed in schedule 18 a criminal offence, apart from using editorial content in the media to promote a product where it is not made clear that it is a paid-for promotion, or including in an advert a direct appeal to children to buy advertised products.

The Opposition recognise the importance of making unfair practices criminal offences and support this clause. However, why does the legislation specifically make two practices in schedule 18 not subject to a criminal offence?

Clause 230 provides a range of potential defences for an offence charged under clause 229. We recognise the need for a defence of due diligence and therefore support this clause. However, we would welcome further explanation from the Minister regarding subsection (1), which specifically outlines that it is a defence for the trader if the offence was “a mistake or accident”. I just wonder whether there is any more guidance regarding what the bar or threshold is here, and about how individuals and businesses will be required to prove that an offence occurred as a result of a mistake or accident.

Amendment 72 ensures that the defence provided for under clause 230(1), the defence of due diligence, does not apply in relation to an offence under clause 229(4). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008. We welcome this common-sense amendment, and we similarly welcome amendment 73.

Clause 231 sets out that where a body corporate commits an offence with the consent of an officer of that body, both the officer and the body corporate can be prosecuted and punished. This also applies if the offence is attributable to neglect on the part of the officer. We welcome this clause because it ensures that all those responsible for an offence that has a detrimental impact on consumers are subject to being held accountable and to action as a result of that offence.

Amendments 74 to 77 ensure that the imposition of liability on another person does not apply to an offence under clause 229(4). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008. Assuming that this is consistent with the current legislation, the Opposition of course support this amendment.

Clause 232 sets out the penalty for offences under this chapter, and how a person guilty of an offence is liable to a fine or imprisonment for a term not exceeding two years. We support this clause.

Finally, clause 233 outlines the time limits for prosecution under clause 229, with a prosecution needing to begin within three years of an offence, or within one year of the offence being discovered by the prosecutor. We support this clause, although is the Minister confident that within a year of discovery will be long enough, particularly considering the current resourcing pressures on our prosecution and justice systems? He may have confidence, and of course we do not want to lengthen the timescales, but how will he know how many prosecutions are missed due to running out of time?

The banned practices to which the shadow Minister and I have referred are not currently subject to criminal liability, and we did not consider it appropriate to introduce new criminal offences.

On the “mistake or accident” defence, the defendant has an obligation to prove it was a mistake or an accident, which I think is a reasonable provision.

The timescales are replicated from the current timescales in the 2008 regulations, so there is nothing new here. We are pretty confident the timescales will be appropriate but, of course, we will continue to engage with the relevant enforcement bodies to make sure they are appropriate.

We have continuing engagement with the various enforcement bodies, such as trading standards and the Competition and Markets Authority, through either officials or Ministers. If there were a problem, we are confident we would receive that feedback and be able to make a decision on how to act accordingly.

I have concluded my remarks.

Question put and agreed to.

Clause 229 accordingly ordered to stand part of the Bill.

Clause 230

Defence of due diligence and innocent publication

Amendments made: 72, clause 230, page 154, line 32, at end insert “subsection (1), (2), (3), (6) or (7) of”.

This amendment ensures that the defence provided for in clause 230(1) (defence of due diligence) does not apply in relation to an offence under clause 229(4) (offence of engaging in an unfair commercial practice which involves a contravention of the requirements of professional diligence). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008.

Amendment 73, clause 230, page 155, line 5, after “under” insert “subsection (1), (2), (3), (6) or (7) of”.—(Kevin Hollinrake.)

This amendment ensures that the defence provided for in clause 230(3) (defence of innocent publication) does not apply in relation to an offence under clause 229(4) (offence of engaging in an unfair commercial practice which involves a contravention of the requirements of professional diligence). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008.

Clause 230, as amended, ordered to stand part of the Bill.

Clause 231

Offences: criminal liability of others

Amendments made: 74, clause 231, page 155, line 30, after “under” insert “subsection (1), (2), (3), (6) or (7) of”.

This amendment ensures that the imposition of liability on another person does not apply in relation to an offence under clause 229(4) (offence of engaging in an unfair commercial practice which involves a contravention of the requirements of professional diligence). This replicates the current position under the Consumer Protection from Unfair Trading Regulations 2008.

Amendment 75, clause 231, page 155, line 31, leave out “section” and insert “subsection”.

This amendment is consequential on Amendment 74.

Amendment 76, clause 231, page 155, line 40, after “under” insert “subsection (1), (2), (3), (6) or (7) of”.

This amendment is consequential on Amendment 74.

Amendment 77, clause 231, page 155, line 41, leave out “section” and insert “subsection”.—(Kevin Hollinrake.)

This amendment is consequential on Amendment 74.

Clause 231, as amended, ordered to stand part of the Bill.

Clauses 232 and 233 ordered to stand part of the Bill.

Clause 234

Powers to amend this Chapter

I beg to move amendment 129, in clause 234, page 157, line 30, leave out subsection (2).

This amendment would ensure that future “banned practices” are both criminal and civil breaches, reflecting their potential seriousness and putting them in line with all but two of the current banned practices.

This amendment would ensure that future banned practices are both criminal and civil breaches, reflecting their potential seriousness and putting them in line with almost all other current banned practices. As we understand it, under the legislation as drafted, any practice added later by the Secretary of State will not be subject to criminal enforcement. Perhaps the Minister can clarify that, because it is slightly unclear. Given that clause 234 is the means by which the Government are planning to take action on fake reviews, will the Minister confirm his intentions on penalties for breaches?

This is a straightforward amendment that seeks to ensure that future action against fake reviews, or any other unfair commercial practice, is just as robust as the action taken on the face of the Bill. I do not intend to press the amendment to a vote, but I would be grateful for a clarification from the Minister because, during the course of the Bill, we will want to understand the penalties and be clear about those for different practices.

I thank the hon. Lady for her amendment and her remarks. She will be aware that, ordinarily, when criminal offences are created, it is important and beneficial for Parliament to have ample opportunity to scrutinise them. That is usually via primary legislation, rather than powers given to Government. There is, of course, nothing to prevent Members of Parliament from introducing primary legislation to criminalise specific practices in future, should the House consider it desirable to do so. In the meantime, any new practices added to schedule 18 will continue to benefit from the relevant civil penalties, as well as the greater deterrent effect that we expect from the considerable reforms that we are introducing.

On the penalties themselves, we will go much further than any UK Government have ever done before; we are empowering the courts and the CMA to impose fines of up to the higher of £300,000 or 10% of worldwide turnover for infringements of consumer-protection law.

I thank the Minister for his comments. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clauses 235 to 242 stand part.

Government amendment 78.

Clauses 243 and 244 stand part.

Clause 234 gives powers to the Secretary of State to amend this chapter. New regulations using the powers may not be made before consultation and will be subject to the affirmative procedure. For example, the power to amend the list of banned commercial practices in schedule 18 will allow the Government to respond more quickly to emerging consumer harms and ensure that appropriate levels of consumer protection are maintained.

The power to amend the list of information deemed to be material in an invitation to purchase means that we can ensure that consumers get the information that they need when they prepare to make a purchase. The power to amend the list of prohibited practices in clause 224(7) will enable the Government to extend private rights of redress to further commercial practices, such as misleading omissions. I hope that hon. Members will agree that it is critical to future-proof the Bill through these provisions, given the constantly evolving environment in which traders operate.

Clause 235 establishes that the Crown is not criminally liable for any infringement of the regulations. This does not affect the application of the regulations in relation to a person in public service of the Crown.

Clause 236 states that a contract or agreement is not void purely because of a breach of this chapter, except for cases where voiding of the contract arises as a result of a consumer exercising their right to redress.

Clause 237 defines “transactional decision”. This is an important and broad definition, which includes decisions before any purchase has taken place as well as decisions after a purchase has taken place.

Clause 238 defines an “average consumer”. It largely restates the equivalent provision from the Consumer Protection from Unfair Trading Regulations 2008.

Clause 239 defines “average consumer” in situations where a group of consumers are particularly vulnerable to a commercial practice. It recognises and makes explicit that consumers may be vulnerable for a range of reasons, including their age, health, credulity and circumstances.

Clause 240 defines “product” for the purposes of this chapter. A product can mean goods, services and digital content. That is important as it means consumers are protected from unfair trading practices when purchasing digital content from businesses online.

Clause 241 defines a range of other terms used in part 4, chapter 1 of the Bill. Clause 242 provides an index of defined terms in this chapter.

Clause 243 revokes the 2008 regulations and re-enacts their substance in part 4, chapter 1 of the Bill. It also makes a small number of consequential amendments to other UK legislation.

Government amendment 78 makes a minor consequential amendment to section 393 of the Communications Act 2003 to include part 4 of this Bill. That will enable Ofcom and the CMA to collaborate in relation to matters covered by part 4 in the same manner that they do for the consumer protection regulations.

Clause 244 sets out that the 2008 regulations will continue to apply to any unfair acts or omissions occurring before this Bill is enacted. The clause also provides that part 4A of the consumer protection regulations, which deals with private right of redress, will continue to apply until new regulations are made under this chapter. I hope hon. Members will accept amendment 78, and I commend the clauses to the Committee.

Clause 234 introduces a provision allowing for the Secretary of State to amend the list of banned practices in schedule 18. The clause will be the route through which we may see later action on fake reviews. The Opposition welcome the flexibility this gives the regime and supports the clause, but I want to ask the Minister one question on changes that can be made.

We have talked about additions, but there is also the power to remove a practice from the schedule. We understand the principle and the importance of the flexibility to add practices, particularly considering the ever-increasing ways that rogue traders can mislead consumers in not only the digital economy, but in the real world. However, I would welcome clarity on the circumstances in which the Government would want to remove a practice from the list and, more importantly, the process it then uses to do so. Will it be subject to similar procedures? It would be helpful to understand that for the record.

Clause 235 exempts the Crown from criminal liability as a result of the provisions in this chapter but does not affect their application to persons in service of the Crown. Will the Minister clarity that Crown exemption?

Clause 236 provides that a contract or any other agreement would not be void or unenforceable due to a breach of the prohibition of unfair commercial practices or the promotion of unfair commercial practices. We recognise that the clause is necessary to ensure that contracts or subscriptions can continue at the wish of the consumer in spite of breaches under this chapter, and we therefore support it.

Clause 237 defines “transactional decision” for the purposes of this chapter. We welcome the clause and the broad definition it introduces. The explanatory notes state that a transactional decision could include, for example, a decision to travel to a shop as a result of a commercial offer, a decision to agree to a sales presentation by a trader, or a decision to click through to a website as a result of information relating to the product. A whole range of purchasing decisions along the consumer journey will fall under this broad and effective definition, allowing for more consumer protection.

Clause 238 defines the meaning of “average consumer” for the purposes of this chapter. As the Minister outlined, the average consumer is defined as reasonably well-informed, observant and circumspect. We particularly welcome subsection (3), which sets out that the average consumer cannot be expected to know when a trader is hiding something from them. That is important, because anyone can be duped by someone hiding information from them. We support the clause.

Clause 239 describes consumers who may be defined as vulnerable persons for the purposes of this chapter. This is really important. Subsection (4) sets out that consumers may be considered vulnerable due to

“their age…their physical or mental health”

or

“the circumstances they are in.”

The Minister outlined some of the context, including that elderly consumers may be more vulnerable to certain practices, such as pressure selling, because of their age. We could even find that younger people are more vulnerable to unfair practices because they do not have the experience to judge products. The clause also covers consumers affected by a serious illness and so on. The explanatory notes expand on the phrase

“the circumstances they are in,”

stating that it includes things such as being in mourning, going through a divorce or losing a job.

We welcome the clause. It is important that we have some considered protection from unfair practices for those who are likely to be more vulnerable. However, that should not lead to unnecessary delay in decisions being made. I came across someone recently who had sadly lost her husband. She wanted to make some transactional changes and was considering selling the family home and moving somewhere more appropriate for her. She had just a little bit of a struggle and was told that she was considered vulnerable, but at the time she really did know what she needed and wanted. We should consider how the clause may be interpreted and implemented so that it does not lead to an unintended outcome that could cause further distress.

Clause 240 defines “product”, for the purposes of this chapter, as goods, a service or digital content. We welcome the clause.

Clause 241 describes how terms are to be read for the purposes of the chapter, including “business”, “code of conduct”, “goods” and “supply”. Having those definitions is extremely helpful not just for traders, but for the consumers for whom this legislation is really intended. Clause 242 provides an index of defined terms for the purposes of the chapter.

Finally, we welcome clause 243 and we support amendment 78. Clause 244, which we also support, sets out how the chapter applies to an act or omission that occurs on or after the commencement date of the chapter.

I think the hon. Lady asked two questions, and I missed the second one. While she is thinking about what the second question was, I will address the first one, which was about why we are establishing the power to delete practices from the banned list. That is because some practices may become redundant or have needless duplication that we need to avoid. For example, Parliament may choose to provide for regulation elsewhere to better address a particular service so that we do not get duplication. The power will require parliamentary approval through the affirmative procedure. As a consequence, there will be a requirement for us to consult on any such changes.

I think the Minister was referring to my second question on the meaning of average consumers and vulnerable persons. Rather than wanting any changes, I wanted him to recognise that someone’s circumstances can lead to an over-assumption of their vulnerability, and an interpretation of that vulnerability can make it more difficult for those who really do know what they want, even though they are in those circumstances.

The hon. Lady makes a very good point. Regulators play a part in this as well by ensuring that the average consumer is assessed correctly and that there is relevant assessment of any characteristics. Businesses can be challenged on the back of that to ensure that they do not exploit consumers, especially those who are vulnerable to a particular commercial practice.

Question put and agreed to.

Clause 234 accordingly ordered to stand part of the Bill.

Clauses 235 to 242 ordered to stand part of the Bill.

Clause 243

Consequential amendments etc relating to this Chapter

Amendment made: 78, in clause 243, page 161, line 21, at end insert—

“(3A) In section 393(5) of the Communications Act 2003 (exceptions to general restrictions on disclosure of information), after paragraph (r) insert—

‘(s) Chapter 1 of Part 4 of the Digital Markets, Competition and Consumers Act 2023.’”—(Kevin Hollinrake.)

This amendment enables OFCOM to disclose information to the CMA for the purpose of the CMA exercising its functions under Chapter 1 of Part 4 of the Bill in the same way that OFCOM may currently disclose information to the CMA for the purpose of the CMA exercising its functions under the Consumer Protection from Unfair Trading Regulations 2008.

Clause 243, as amended, ordered to stand part of the Bill.

Clause 244 ordered to stand part of the Bill.

Clause 245

Overview

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clauses 246 and 247 stand part.

That schedule 19 be the Nineteenth schedule to the Bill.

In chapter 2 of part 4 of the Bill, we are introducing measures to give consumers new rights over their subscription contracts, while ensuring that businesses are not overburdened by regulations. The measures are an important part of the Government’s commitment to help consumers have more control over their spending. Together, they will deliver £400 million in consumer benefits per year.

Clause 245 assists readers to navigate the chapter. Clause 246 provides a legal definition of a subscription contract.

There may be some regulations to deploy after that. I can find out for definite if the hon. Gentleman gives me a few minutes. It is in the Bill, of course, so it should be pretty quick.

Clause 246 provides a legal definition of a subscription contract, which is principally one that automatically renews or continues so that a consumer continues to be liable for payments unless they end the contract. That includes contracts that are of fixed duration but can be ended earlier by the consumer. Contracts that offer a free or reduced-cost trial for a defined period and then revert to a higher cost are also in the scope of the chapter. It is critical that such contracts are included as calculations show that each year, around a quarter of consumers get rolled over accidentally from free or reduced-price trials.

Clause 247 provides for specific sectors and subscription contract types to be excluded from the chapter and those sectors are detailed in schedule 19. The sectors have been excluded because they are already subject to regulation and may be supervised by a specialist regulator. To apply the chapter to them would overburden them with regulation and trespass on the remit of a specialist regulator. It could also potentially create conflict between the regulation and legislation, particularly if the sectors already provide consumers with similar protections.

Sectors may also have been excluded on public policy grounds, such as the exclusion for childcare. The childcare sector, like many of the other excluded sectors, provides an essential service and these are not the type of contracts that we consider raise the risks commonly associated with a subscription trap. The exclusions in schedule 19 may need to change over time as the regulatory and legislative regimes for the excluded sectors change. That is why clause 247 ensures that the Secretary of State has the power to adapt the provisions through secondary legislation.

Clause 245 provides an overview of this chapter, which centres around duties on traders in relation to subscription contracts and the rights of consumers if those duties are breached. The chapter also introduces further rights and protections for consumers in relation to subscription traps, specifically regarding the right to cancel contracts during cooling-off periods, and the information that must be made available to consumers.

We welcome the principles of the chapter and I note that before the Bill was bought before the House, the Labour party had already announced that we would legislate in government to tackle subscription traps and protect consumers, particularly in the light of the Conservative cost of living crisis, because we know that things have become worse for consumers. Any time the Government want to adopt a Labour proposal, we will welcome it. We have tabled some new clauses in this area, which I will come to later.

Let me start by welcoming the action on subscription traps taken by the Government so far in the Bill. As I said before, Citizens Advice estimates that £306 million a year is spent on unwanted subscriptions in the UK, so we need to act and, in that spirit, to work constructively with Ministers to ensure that the measures are as robust as possible.

Clause 246 defines the scope of subscription traps, which are defined as a business-to-consumer contract for the supply of goods, services and digital content that either auto-renews for an indefinite or fixed period or contains a free trial or specified reduced price for a specified period in the contract, after which time the contract renews and the consumer becomes automatically liable for payments. We welcome the definition and the important inclusion of subscriptions that start with a free trial, a technique that is commonly used. However, I want to press the Minister on subsection (1), which sets out that

“a subscription contract is a contract between a trader and a consumer”.

The Minister will probably have a straightforward answer on how business-to-business subscriptions are covered. There are plenty of instances where a business may pay for a subscription, so I would welcome assurances about how businesses are covered, particularly smaller businesses and those run by the self-employed.

Clause 247 sets out that certain types of contracts are “excluded contracts”, meaning that they are not subject to the regulations in this chapter. We see the clause as necessary to ensure that certain types of subscription are not affected by the Bill, specifically subscription contracts for which it would be impractical for the regulations to apply. We welcome the power in the clause and recognise the need for the Secretary of State to have the flexibility to add other types of contracts to the list of excluded contracts, which is subject to the affirmative procedure. The clause sets out that if a contract is listed in schedule 19, it falls under the definition of an excluded contract.

Included in schedule 19 as excluded contracts are utility bills such as those for electricity, gas and heating, as well as medical prescriptions, insurance, rent payments and childcare, among others. We understand some of the reasons for those common-sense exclusions, but can the Minister tell us whether the Government have consulted relevant stakeholders on the exclusions? Were there any suggestions to include in the schedule contracts that have not made it into the Bill?

I think the hon. Lady raised two points. The provisions apply specifically to traders to consumers, not traders to businesses. On how we determine the exemptions, such as for magazines, delivery services, gyms, software and so on, a range of stakeholders, including regulators, businesses and consumer groups, developed the list and the scope of sectors that are exempt from the subscription measures.[Official Report, 20 July 2023, Vol. 736, c. 13MC.]

Question put and agreed to.

Clause 245 accordingly ordered to stand part of the Bill.

Clause 246 and 247 ordered to stand part of the Bill.

Schedule 19

Excluded contracts

I beg to move amendment 117, in schedule 19, page 349, line 39, at end insert—

“Non-commercial society lotteries

13 (1) A contract under which a lottery ticket or tickets are purchased for one or more non-commercial society lotteries.

(2) In sub-paragraph (1), “non-commercial society” has the meaning given by section 19 of the Gambling Act 2005, and “lottery ticket” has the meaning given by section 253 of that Act.”

This amendment seeks to exclude lottery tickets purchased for non-commercial society lotteries from the scope of the provisions on subscription contracts.

It is a pleasure to serve under your chairmanship, Dame Maria.

A few moments ago, I was encouraged to hear the Minister express a desire not to trespass on any of the specialist regulators, and I am delighted to say that that is exactly what the amendment is intended to achieve. I hope we can all agree that charity lotteries do an awful lot of good. They raise an awful lot of money, and they are fun. They are also already heavily regulated by the Gambling Commission. If the Gambling Commission does not fall under the category of specialist regulator, I am not entirely sure what does.

I raised this issue on Second Reading, but I was beaten to the punch by the right hon. Member for Calder Valley (Craig Whittaker), who said that subscription-based charity lotteries

“are already heavily regulated by the Gambling Commission”.—[Official Report, 17 May 2023; Vol. 732, c. 882.]

He wanted to see whether such lotteries could be removed from schedule 19, and the Minister committed to looking at the matter in detail. I do not know what the result of the Minister’s deliberations has been. I know that by the time the Under-Secretary of State for Science, Innovation and Technology was on his feet to sum up he was certain that it would fall outside the scope of the Bill. Despite his best efforts on that occasion, I have to say that some of the representatives of the charity lottery sector I have spoken to are not reassured.

There remains an uncertainty. For all the best intentions of Ministers, and whatever ends up in Hansard as a result of our discussions on Second Reading and today, the Bill contains significant ambiguity. In that regard, it is unclear in a way that it does not need to be. Amendment 117 would add charity lotteries to the list of excluded contracts in schedule 19, so it would remove any remaining doubt that they are excluded from the provision. They will therefore be able to continue under the legislative environment that the Government have already set for them, which seems to work quite successfully, and will be able to do so without having any additional inhibitors put in their way in collecting revenues from the public and their customers, and crucially in paying out to good causes, which I am sure that we have all seen the benefits of across our constituencies.

I do not propose to say much on the amendment. The hon. Member has laid out his arguments, and it would be helpful to hear some clarity from the Minister on his position.

The hon. Member for Gordon makes an excellent point. As he said, the point was raised on Second Reading. We appreciate the work that society lotteries do in terms of fundraising—that £400 million a year is vital for many good causes. It is certainly not our intention to capture society lotteries, including the national lottery, in this chapter of the legislation on subscription contracts. We are working with the society lottery sector to understand whether we need to further clarify the legislation to reflect that. I am sure that we will discuss the issue again during later stages of the Bill.

If the Minister can assure me that we will have that open dialogue, and that the Government will share the outcomes of their deliberations, at this stage I am content to withdraw the amendment, but I will return to it on Report, contingent on what he is able to say at that point. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 19 agreed to.

Clause 248

Pre-contract information

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss:

That schedule 20 be the Twentieth schedule to the Bill.

Clauses 249 to 253 stand part.

New clause 5—Contract renewal: option to opt in—

“(1) Before a trader enters into a subscription contract with a consumer where section 246(2) applies, the trader must ask the consumer whether they wish to opt into an arrangement under which the contract renews automatically at one or more of the following times—

(a) after a period of six months and every six months thereafter, or

(b) if the period between the consumer being charged for the first and second time is longer than six months, each time payment is due.

(2) If the consumer does not opt into such an arrangement, the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than 28 days before the renewal date.

(3) If the consumer has not—

(a) opted into an arrangement under subsection (1),

(b) given notification of the consumer’s intention to renew by the date specified under subsection (2), the contract will lapse on the renewal date.”

This new clause would allow the consumer to opt-out of their subscription auto-renewing every six months, or if the period between payments is longer than six months, before every payment. If the consumer does not opt-in of auto-renewal, they would be required to notify the trader manually if they wanted to renew.

New clause 6—Contract renewal: variable rate contracts—

“(1) Before a trader enters into a subscription contract with a consumer where section 246(3) applies, the trader must ask the consumer whether they wish to opt into an arrangement under which the contract renews automatically on the date the consumer becomes liable for the first charge or the first higher charge.

(2) If the consumer does not opt into an arrangement under subsection (1), the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than five days before the renewal date.

(3) The trader must also ask the consumer whether they wish to opt into an arrangement under which the contract renews automatically—

(a) after a period of either six months from the first charge or higher charge and every six months thereafter, or

(b) if the period between the consumer being charged for the first and second time is longer than six months, each time payment is due.

(4) If the consumer does not opt into an arrangement under subsection (3), the trader must provide a date by which the consumer must notify the trader of the consumer’s intention to renew the contract, which must be no earlier than 28 days before the renewal date.

(5) If the consumer has not—

(a) opted into an arrangement under subsection (1) or subsection (3), or

(b) given notification of the consumer’s intention to renew by the date specified under (as the case may be) subsection (2) or subsection (4),

the contract will lapse on the next renewal date.”

This new clause would introduce an option for the consumer to opt out of their subscription auto-renewing after their free or discounted trial. Otherwise, they would have to notify the trader manually if they wanted to continue the subscription. It also introduces an option for the consumer to opt out of their subscription auto-renewing.

Clause 248 places duties on the trader to provide the consumer with pre-contract information set out in schedule 20 before they enter a contract. All key pre-contract information must be given together to the consumer and separately from any other information. That is to ensure that it is not obscured by technical detail or marketing material and the consumer’s attention is focused on the information that they need to make an informed decision.

Clause 249 sets out obligations on the trader in concluding a contract, such as ensuring that the consumer expressly acknowledges their payment obligation if the contract is made online. That will ensure that consumers are fully aware of the contract they are entering.

As the hon. Member for Gordon said, the national lottery has an amazing track record—£47 billion has been given to good causes over many years—and we do not want this great institution, of which we should all be proud, to be hamstrung by endless requirements such as reminder notices. Will the Minister table amendments to the Bill on reminder notices ahead of Report that would ensure that the national lottery is exempt, as intended?

My hon. Friend is absolutely right that we do not intend to include national lotteries or society lotteries in this legislation. We are talking to those bodies to ensure that they are confident that that is the case. If we need to amend the Bill to do that, we will, but those conversations will continue. I am grateful to my hon. Friend for making that point.

Clause 250 requires traders to send reminder notices in certain instances. A reminder must be sent on the first occasion that a subscription renews, including when a free or low-cost trial is coming to an end. That will ensure that consumers know they will soon become liable for payments, or higher payments, and can decide whether they want to continue the contract.

The Minister says that clause 250 is relevant only in certain circumstances. Can he be clear that the Government’s intention is not for the provision to cover someone who has perhaps been a decades-long subscriber to, for example, Sky? I hate to pick a particular company, but it is for the purposes of the conversation—I am not a Sky subscriber. Is the Minister saying that, if a person had had a contract for a decade and was a regular viewer of sports channels, or whatever it might be, they would not be caught by the clause? The “certain circumstances” do not seem to be well understood by some businesses outside this building.

We have had dialogue with Sky, and many other organisations have contacted us to clarify some points. A subscription contract with Sky would fall under the provisions. Sky may be concerned about certain things, in terms of cooling-off periods, but I have not had any feedback from Sky or others that they have concerns about these particular provisions, unless the hon. Gentleman wants to mention something specifically.

I think that Sky briefed quite widely—it briefed members of the Committee and beyond—that it thinks that it is caught by the provision and that it covers all contracts. I can understand that a person would be caught by the new provisions if they had a new contract where there was a discount, as my hon. Friend the Member for Feltham and Heston already pointed out, but to impose the condition retrospectively on business contracts that someone could have had for decades seems to place a new onus on existing business arrangements. The Government have avoided doing that in other legislation, and I wonder about the rationale. I picked Sky off the top of my head, but it is an organisation that is concerned.

I did not quite understand the hon. Gentleman’s point when he first made it. I think he is saying that it covers existing contracts as well as new contracts. Is that his point, and can I come back to him on it?

After the first renewal reminder, consumers with a monthly renewing contract will be sent a reminder around the six-month mark. For contracts that renew less frequently than every six months, such as annual subscriptions, a reminder will generally be sent whenever the contract renews.

Clause 251 sets out the required timescales for serving reminder notices. Parts 1 and 2 of schedule 20 set out what pre-contract information traders must give to the consumer before they enter a contract. Part 3 of schedule 20 sets out the information that traders must include in a reminder notice.

I can address the point made by the hon. Member for Bermondsey and Old Southwark right now, if he would like: the subscription contract clauses will apply only to new contracts taken after chapter 2 comes into force. Reminder notices must include information on the forthcoming payment, including any increase since the last renewal. They must also include an indication of how long the consumer will be committed following renewal, and how to end the contract should the consumer wish to.

Clause 252 requires traders to provide a clear and straightforward cancellation route for consumers to exit a contract. Through the clause, consumers will be able to exit their contract in a single communication and without having to take any steps that are not reasonably necessary for ending their contract. That will put an end to poor practices that force consumers to spend a disproportionate amount of time and energy trying to exit their contract.

I thank the Minister for giving way; he has been very generous. To be clear, is it the Government’s expectation that a subscription could be cancelled through a single communication from any device or social media platform? Over recent days, significant figures have tried to close bank accounts and other things by tweeting. Is it the Government’s expectation that this communication would come from a verified point of contact, such as an email address or phone number that the company holds? Otherwise, I could set up a Twitter account—or a Threads account, as we have seen this week—in the Minister’s name and then cancel his TV, or other, subscriptions.

I may have misunderstood his point, but I think the example he gave was of a bank closing an account from Twitter. That is the other way around—that is the bank closing the account rather than the customer.

Okay, but I think clause 252 is clear that there must be a straightforward cancellation route for consumers to exit a contract. He appears to describe a convoluted route, but I did not quite understand it. Would he like to expand on his point?

Sorry if I was not clear. I thank the Minister for checking. Will it have to be from a single point of contact, such as a verified address, to protect the customer as well as the business? If I wanted to cancel a contract, would I have to use the email address or phone number that the company holds for me and not, as the Bill currently reads, a Facebook post or something that the business may not be able to confirm is mine? Does that help?

I am not sure whether it does or not. I refer the hon. Gentleman to one of my earlier points: it is a straightforward cancellation route. What he describes to me is not a straightforward cancellation route. That is the key definition. We can have a discussion after this sitting.

Clause 253 requires a trader to send a notice confirming when the contract was, or will be, ended once they have been notified of cancellation by the consumer. This also applies where a consumer exercises a cancellation right under this chapter. The trader must provide this notice promptly, and on a durable medium, and refund consumers any overpayment for which they are no longer liable.

I now turn to new clauses 5 and 6, which I will address together. They propose that traders must obtain a consumer’s express agreement to an auto-renewing contract by the consumer’s active opt-in. Through new clause 5, when consumers sign up to a subscription contract, they would have to be given the option to choose whether their subscription auto-renews after six months. If they do not choose this auto-renewal option, the contract would end after six months unless the consumer expressly asks for it to continue.

New clause 6 would apply equivalent requirements to contracts that auto-renew after a free or low-cost trial and may also auto-renew again subsequently. The Government share the view that consumers must be able to avoid being trapped in unwanted subscriptions and ensure their hard-earned cash is spent only on subscriptions they actually want. However, we know that the majority of consumers enjoy the auto-renewing features of their subscription contracts and the convenience they provide.

Through these new clauses, if a consumer had not opted-in to an auto-renewing contract, but they decide they want to keep their subscription, they would have to repeatedly respond to emails or similar to continue their subscription, or risk it unintentionally lapsing. That risk could be multiplied across each subscription they hold. For that reason, the Government decided not to pursue that approach, which was supported by our public consultation.

It is also important to consider the burdens the changes could place on businesses. The measures would add significant regulatory costs to businesses as they adapt their business models to meet the proposals. We are confident that the approach we have taken strikes the right balance of ensuring consumers are able to exit their contracts at various points during their contract, as well as maintaining consumer convenience.

Furthermore, the existing clauses in this chapter already achieve much of the ambition of the amendments. As I set out earlier, clause 250 will ensure consumers are sent regular reminders about their subscription, including towards the end of a free or low-cost trial. These reminders will ensure that consumers have the right information at the right time to decide if they want to continue their contract, or cancel it.

In addition, through clause 252 we will ensure easy cancellation routes so that subscriptions are as easy to leave as they are to enter. Finally, the Bill enhances consumers’ existing cooling-off rights. Clause 256, which we will discuss shortly, introduces an extra 14-day cooling-off period after a free or low-cost trial, and at the 12-month mark when a longer-term contract auto-renews. That means that, if for any reason a consumer has not been able to take action to cancel before renewal, they have an extra chance to do so.

Together, those measures will ensure that consumers can make informed decisions about their subscription contract. They also make it easy to leave while avoiding creating additional steps for those who want to continue. I hope that reassures hon. Members that the Bill will enable consumers to manage their contracts effectively, and that they feel able to withdraw the amendments.

Clause 248 introduces provisions requiring traders providing a subscription contract to give consumer information as set out in schedule 20, which I will say a few words on shortly.

We very much welcome this clause as necessary in ensuring consumers are as informed as they possibly can be before entering into a subscription contract. I just ask the Minister to expand on subsection (2) It sets out that the information must be provided

“as close in time to entering into the contract as is practicable”.

I would welcome clarification on that requirement. Under that provision, exactly when would the Minister expect a time as close to entering into the contract to be practicable?

Schedule 20 on pre-contract information and reminder notices sets out information that is required for traders to give to consumers before entering into a subscription contract. Among other things, it would require traders to provide information on how often payments will be taken, to provide consumers with a pro-rata cost per month, to state the minimum total amount for which a consumer would be liable under the contract, to outline how the consumer could exit the contract, and to provide a summary of the consumer’s right to cancel the contract and of the right to cancel the contract within a renewal cooling-off period. The schedule is necessary for giving consumers the chance to have that information before entering into a subscription contract. We welcome its inclusion in the Bill.

Clause 249 introduces provisions requiring traders to ensure that the final step consumers take when entering into an online contract involves the consumer expressly acknowledging that the contract imposes an obligation on them to make payments to the trader. This clause and clause 248 are vital in ensuring consumers are informed before choosing to enter into a subscription—a minimum requirement for ensuring effective consumer protection in this area.

The Opposition welcomes how, if the trader does not comply with that requirement, the consumer would not bound by the subscription contract. In addition, traders would be required to give consumers additional information on whether there are any restrictions on the delivery of the product to be supplied under the contract, and which means of payment would be accepted for the contract.

Clause 250 covers reminder notices. Alongside clause 251, it has the effect of requiring traders to issue written reminder notices to consumers explaining that a subscription contract is going to continue, and a renewal payment will fall due unless the consumer takes steps to end it. Those reminder notices would not need to be issued more frequently than once every six months, which we welcome as a timeframe allowing for informed consumers without causing undue annoyance. The first reminder notice must include the first renewal payment, for which the consumer will become liable under the contract, and each subsequent renewal payment. We welcome the clause, and I will further discuss ensuring that consumers are not locked into subscriptions in the provisions to come.

Clause 251 sets out the timing and content of the reminder notices. Under the clause, the reminder notice must be given to the consumer between three and five working days before the last cancellation date, meaning the last day on which the consumer can end the contract and avoid becoming liable for the next renewal payment. The Opposition welcome the timeframes, including that for a 12-month subscription contract, as giving the consumer sufficient time to decide whether they still want their subscription contract to continue and, if necessary, to cancel the contract before a renewal payment is due.

Clause 252 introduces provisions imposing on traders an obligation to put in place arrangements to enable consumers to end a subscription contract in a single communication and without having to take any unreasonable steps. The purpose of the clause is to prevent traders adopting practices that would deliberately hinder a consumer exercising their rights to exit a subscription contract. It is a welcome clause, which should tackle the practice of, as the explanatory notes set out, requiring consumers to phone a call centre, complete a long form, or complete a survey of their reasons for exiting—all those things are barriers to the consumer making the decision to exit the contract. Those are unnecessarily onerous cancelling terms, and could lead to consumers not cancelling a subscription when they need to. Sometimes that could also be because people are short of time or they may not be able to do everything in one moment.

It should be as easy to exit the contract as it is to enter it. Will the Minister expand on whether he is confident the provision will have the desired effect of stopping traders making it harder to leave a contract than to enter it? Does he think the provision goes far enough in ensuring there are not those undue hurdles?

Clause 253 relates to where the consumer has exercised a right to cancel and sets out a requirement on the trader. The trader is to give the consumer an end-of-contract notice acknowledging the request to cancel, which must be in writing and there must be a clear date when it is going to take place. The end of contract notice must be given within three working days after the day on which the consumer has given notice of cancellation, or, when the consumer notifies cancellation online, the trader must give the end of contract notice within 24 hours of cancellation. In addition, any overpayment received by the trader must be refunded to the consumer. We welcome the clause as providing greater transparency for the consumer throughout the cancellation process.

I move to speak to new clause 5 and 6, tabled by myself and my hon. Friend the Member for Pontypridd. As has already been expressed, while the measures in the Bill certainly improve current legislation and ensure that consumers are more informed of their rights and circumstances in subscription contracts, they fall short of the action we need. As Citizens Advice told us during the Committee’s evidence sessions:

“we think that the intent is right, but this is potentially a huge missed opportunity for action on subscription traps.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 14, Q17.]

That sentiment is echoed in the written submission of Which? to the Committee, which states that

“the Government could have gone further within this Bill”

in tackling subscription traps. The Minister will be happy to hear that that does not need to mean going back to the drawing board. As I mentioned, we announced in April this year that we want to take action on subscription traps. As Citizens Advice again said in its evidence to the Committee:

“The specific change that would make a huge difference and is legislatively straightforward is to provide that, at the end of an annual trial subscription, the default is that the consumer opts out. That is not about things like car insurance, where there is a detriment to people opting out, but for basic subscriptions, opt-out should be the default.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 14, Q17.]

That is our policy, and it is precisely what new clauses 5 and 6 would do.

New clause 5 would allow the consumer to opt in to their subscription auto-renewing every six months or, if the period between payments is longer than six months, before every payment. If the consumer does not opt in for auto-renewal, they would be required to notify the trader manually if they wanted to renew. New clause 6 would similarly introduce an option for the consumer to opt into their subscription auto-renewing after their free or discounted trial; otherwise, they would have to notify the trader manually if they wanted to continue the subscription. These are two straightforward new clauses that would result in consumers being considerably more empowered at the start of, end of and throughout their subscription contract, allowing them to opt into auto-renewal.

Action in this area could not be more necessary. We have talked about the people spend per year on unwanted subscriptions; indeed, the Government’s own analysis estimates that UK consumers spend £1.6 billion a year on subscriptions. In the midst of a cost of living crisis, this could well be an important support for family and individual income. As the Consumer Council stated in its evidence to the Committee:

“In the online detriment research that we carried out, one consumer told us that they signed up for a 30-day trial but it took them six months to get the subscription cancelled.”––[Official Report, Digital Markets, Competition and Consumers Public Bill Committee, 13 June 2023; c. 35, Q47.]

In circumstances such as that, the simple process of opting in or out of auto-renewing at the start of the contract would have enabled the consumer to easily opt out and, in doing so, saved them valuable funds. We want to get this issue sorted. I welcome the Minister’s response and again make the offer to work with us on this as we move forwards through the passage of the Bill.

There are a few points to pick up on there. The shadow Minister wanted clarification on what “as soon as practicable” means. We expect traders to provide consumers with the relevant pre-contract information immediately before concluding the contract. If the contract is concluded online, that information should be provided during the online order process. If face to face, the trader should give that information before a contract is agreed.

The hon. Member for Bermondsey and Old Southwark raised a point about when the provisions will commence. We do not clearly have a set commencement date at this point in time, but we are keen to get these measures in place to protect consumers. We also recognise that there must be sufficient time for businesses to adapt, and we will engage with stakeholders, including the ones referred to by the hon. Gentleman, to ensure that an appropriate transition takes place. When cancelling or ending a contract, is a single tweet enough? I think that was the hon. Gentleman’s point. The ability of the consumer to end their contract by notifying the trader by any means is a safety net whereby consumers can always use the fall-back option of a simple notification if it is preferable or easier for them, particularly if the trader has failed to provide a clear route for consumers to end their contract.

Where necessary, the Government will provide further clarification in business guidance, which will obviously include discussions with stakeholders. However, as the provisions state, it is important that consumers notify a trader in a way that clearly communicates their intention to end the contract, which can be actioned by the trader. Hence this notification must be given in a sufficiently clear manner. I think it is fair to say that a sole tweet probably would not be sufficiently clear.

I think that last comment about a tweet not being sufficient would be welcomed by responsible businesses that just want to use the verified contact details.

The other point is perhaps a bit more worrying, Chair. We are quite well into this Bill Committee. There is an economic impact assessment. The Minister has said today that the measures would be implemented immediately, but has just corrected that in his final comment. The assessment set out here does not now include the cost to business of implementing these measures, because we do not have a start date. How can businesses plan to implement measures when they do not know their start date, and they do not know because the Minister is still clarifying what would be considered sufficient contact from a customer to close an account?

Do the Government intend to provide new impact assessments to reflect what the Minister has just said—?

When will the Government provide the right figures for what this will cost businesses in Britain?

The assessment is set out. The impact assessment for businesses states a figure of £179 million, I think.

No, I am not giving way, thank you very much, because I want to address the hon. Gentleman’s points.

Regarding when these provisions will commence, of course we do not know how quickly this legislation will pass through both Houses of Parliament. It will be subject to much debate, including by people such as the hon. Gentleman. However, I have said clearly that the Government will give guidance and work with stakeholders to make sure that they fully understand the provisions in this legislation and have time to prepare for them. That is what I said in my earlier remarks, so I think the hon. Gentleman is being a bit churlish in terms of that perspective, perhaps for political purposes. However, all the way through this legislation, we have been keen to strike a balance between what is right for consumers and right for businesses. That is a balance we intend to strike, because we fully recognise the needs of business as well as the needs of consumers.

Question put and agreed to.

Clause 248 accordingly ordered to stand part of the Bill.

Schedule 20 agreed to.

Clauses 249 to 253 ordered to stand part of the Bill.

Clause 254

Terms implied into contracts

Question proposed, That the clause stand part of the Bill.

Clause 254 sets out that a trader’s compliance with their main duties under this chapter is an implied term in every subscription contract. The clause is necessary as it gives the consumer access to legal remedies or defences to a claim by the trader where the trader has failed to comply with duties set out in this chapter.

Clause 255 gives consumers a right to cancel their contract if a trader fails to give the required key pre-contract information or reminder notices, or if their failure to provide an easy way of ending the contract means that a consumer remains trapped in their contract. Consumers who cancel their contract as a result of such breaches will be able to do so without penalty, and in prescribed circumstances may be entitled to a refund.

Clause 254 sets out that the trader must comply with certain terms in every subscription contract they enter into, and various information is given about what is expected. We welcome the inclusion of clauses 254 and 255 in the Bill.

Question put and agreed to.

Clause 254 accordingly ordered to stand part of the Bill.

Clause 255 ordered to stand part of the Bill.

Clause 256

Right to cancel during cooling-off periods

I beg to move amendment 113, in clause 256, page 170, line 22, leave out “any circumstances” and insert

“circumstances where the consumer has not yet made use of the goods or service provided under the contract”.

I had intended to withdraw this amendment, because I received assurances from the Minister that the Government will take this issue seriously. I tabled it because of concerns about the length of cooling-off periods. People can join a service, binge watch an entire series, resign, and then go back again and again. The Minister assured me about that, but I look forward to hearing his comments.

I thank my hon. Friend for his amendment. He is absolutely right to draw attention to this issue.

The initial cooling-off period ensures that a consumer has 14 days to cancel after signing up if they change their mind or do not like the product. The renewal cooling-off period further strengthens consumers’ cancellation rights by giving them an additional 14-day window to cancel their contract later on in some circumstances.

My hon. Friend makes important points. Cancellation rights should be fair to businesses, of course. The aim of the measures in the Bill is to give consumers a window in which they can change their mind before taking on, or renewing, a contract for what can be a significant ongoing liability. We heard several examples of consumers who missed the end of their free trial by a short period, and were then committed to an expensive contract because they had not cancelled in time. However, my hon. Friend makes a good point because there are particular circumstances around the supply of digital streaming services that have to be taken into account to ensure the Bill is fair to businesses. We will engage with businesses, regulators and consumers to ensure that refund and return sales are fair and practical, and work across all sectors, including digital streaming. We intend to return to this issue in secondary legislation to ensure the provisions are fair to providers and the services they provide. I very much hope my hon. Friend feels able to withdraw his amendment. We will engage in further discussions in due course.

I thank my hon. Friend for his reassuring comments. He says we will deal with this issue later when we come to secondary legislation, so I will not press the amendment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Clauses 256 and 257 set out an initial cooling-off period, and, in some circumstances, a new renewal cooling-off period. They provide that the consumer can cancel any time after signing up until 14 days after receiving goods, or 14 days after the date of the contract for anything else, such as services or digital content. The renewal cooling off period will apply when a free or low-cost trial ends and the consumer becomes liable for payments or higher payments. It will also apply when a contract auto-renews to a new term of 12 months or longer.

Clause 258 requires traders to give consumers a cooling-off notice whenever a renewal cooling-off period applies. This information confirms that the contract has renewed and informs consumers of their right to cancel.

As I mentioned in relation to amendment 113, clause 259 creates a regulation-making power. The regulations may provide for conditions or restrictions on the exercise of a cancellation right. They will set out detailed rules on the consequences of cancellation for the consumer’s refund rights and any arrangements for goods to be returned to the trader.

Clause 259 also gives power for a cooling-off period to be extended in specified cases. The regulations will set clear expectations on traders and consumers, so that they know their respective rights and responsibilities when a consumer cancels their subscription contract. Government will work with a range of stakeholders in developing the regulations. Where we intend to make regulations containing rules extending a cooling-off period, we have committed in clause 259(5) to consult.

The clause gives the consumer the right to cancel a subscription contract without penalty during the initial cooling-off period and any renewal cooling-off period. That right, exercisable in any circumstances, cannot be subject to any restrictions or conditions imposed by the trader. The definition and timescales of cooling-off periods are defined in later clauses.

The clause is important to give consistency to the consumer about what rights they should expect in both initial and renewal cooling-off periods. We welcome the clause enabling the consumer to stop the renewal of a contract that may have renewed without them realising. I am also grateful to the Minister, for his response to amendment 113 and the questions posed by the hon. Member for Clacton.

Clause 257 sets out the meaning of initial and renewal cooling-off periods, as well as the timescales for such periods. We welcome the clause and the clear definitions. Under clause 258, the trader would be required to give a consumer notice of each renewal cooling-off period. Again, we welcome that, the clarification of consumer rights in those periods and the provision of transparency to consumers.

Clause 259 provides a delegated power for the Secretary of State to make further provision, by regulations, on the exercise of a consumer’s rights to cancel a subscription contract. It specifically empowers the Secretary of State to make provision on the exercise of the rights of a consumer to cancel a subscription contract, the consequences that follow a consumer exercising such rights, and extending a cooling-off cancellation period in such cases and to such an extent as the regulations may specify. We recognise the need for flexibility in this new subscription contract regulatory regime, and thus the flexibility to future-proof the regime, dealing with circumstances as they arise. We support this clause as well.

Question put and agreed to.

Clause 256 accordingly ordered to stand part of the Bill.

Clauses 257 to 259 ordered to stand part of the Bill.

Clause 260

Offence of failing to provide pre-contract information about initial cooling-off rights

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clauses 261 and 262 stand part.

Amendment 128, in clause 263, page 175, line 40, leave out

“level 5 on the standard scale”

and insert—

“the statutory maximum;

(c) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine (or both).”

This amendment would make subscription traps offences “triable either way”, therefore bringing it in line with other similar offences in the Bill, for example for misleading actions.

Clause 263 stand part.

The clause sets out that the trader commits an offence if they enter into an off-premises subscription contract and do not provide information about a consumer’s initial cooling-off cancellation right. Off-premises contracts mainly consist of contracts that are not concluded on the trader’s business premises and include situations such as doorstep selling.

In off-premises sales, the consumer is typically more vulnerable to poor trading practices. It is therefore necessary to make breach of this requirement an offence to act as an extra deterrent to rogue traders. That approach maintains consistency with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, which stipulate that failure to provide required pre-contract information about cooling-off cancellation rights in the case of off-premises contracts is an offence.

Clause 261 provides a defence for a person charged with the offence set out in clause 260. That is to ensure that if an offence was committed due to the act or omission of a third party and without fault on the part of the person charged, they are not held criminally liable. The trader must prove that they exercised due diligence to avoid the offence being committed by themselves or another person under their control. Clause 262 sets out that an officer can be held criminally liable if an offence was committed by a company or other corporate body with the consent or connivance of that officer or due to their neglect. That is necessary to strengthen the deterrent effect of the offence and hold other responsible people accountable. Clause 263 sets out that traders who commit an offence contrary to clause 260(1) are liable to a fine.

Amendment 128 would allow traders to be prosecuted in both magistrates court and Crown court and increase potential penalties, including imprisonment, where traders do not inform consumers about their cancellation rights before entering off-premises subscription contracts. I appreciate that hon. Members wish to ensure that penalties are consistent with those elsewhere in the Bill. However, the penalties are designed to be consistent with those for failure to provide information about cancellation rights for off-premises contracts in the 2013 regulations, which currently govern all consumer contracts and will continue to govern other off-premises contracts. Consistency is important to ensure that breaches of equivalent rules are treated fairly and consistently, regardless of the type of contract. I therefore urge that the amendment be withdrawn.

Clause 260 creates an offence where a trader fails to provide the relevant information on a consumer’s initial cooling-off cancellation rights before entering into an off-premises subscription contract. That contract is defined in subsection (5) and could include contracts concluded by door-to-door sellers or traders using temporary high street stands. It is a welcome clause and an important way of increasing consumer protection, ensuring that all kinds of subscription contracts and not just those entered into online are regulated under the chapter.

Clause 261 introduces a provision providing traders with a defence of due diligence to the offence laid out in clause 260. That defence enables the trader to prove that another person was responsible for the offence and that the trader took all steps to avoid committing the offence. While we recognise that it is important that traders have a right to a defence, I welcome the Minister’s assurances that this has been worked through and there is confidence that rogue traders will not be able to abuse that defence and argue their way out of criminal enforcement by claiming due diligence.

Clause 262 would establish direct liability for company officers for offences committed by the body corporate in circumstances where it is proven to have been committed with the consent or connivance of a company officer or neglect on their part. We welcome the clause.

Finally, clause 263 sets out how a person who commits an offence under clause 260 is liable on summary conviction to a fine. The Minister has outlined his response to that and it is helpful for me to briefly speak to amendment 128, tabled by myself and my hon. Friend the Member for Pontypridd. As is clear in the explanatory note, the amendment

“would make subscription traps offences ‘triable either way’, therefore bringing it in line with other similar offences in the Bill, for example for misleading actions.”

The Minister has outlined another way in which he sees that as being consistent with how penalties are applied.

We will not push the amendment to a vote. The most important thing is that there is consistency, and we will look again at what the Minister has said today.

The hon. Lady asks me to address her point about the defence of due diligence. The defences listed in the clause are consistent with defences in other areas of the law, so we are comfortable that they strike the right balance.

Question put and agreed to.

Clause 260 accordingly ordered to stand part of the Bill.

Clauses 261 and 262 ordered to stand part of the Bill.

Clause 263 ordered to stand part of the Bill.

Clause 264

Information and notices: timing and burden of proof

I beg to move amendment 79, in clause 264, page 176, line 31, after “period” insert “or date”.

This amendment corrects a drafting error.

With this it will be convenient to discuss the following:

Clause stand part.

Clauses 265 to 271 stand part.

Government amendments 80 to 82.

Clauses 272 and 273 stand part.

Clauses 264 to 273 set out how to determine when information or notices are deemed to have been given and where the burden of proof lies in any dispute. Clause 264 sets out how to determine whether a trader or consumer has taken action as required by this chapter, and who is responsible for proving that.

Government amendment 79 is a drafting amendment to ensure consistency across the affected subsection as to when a consumer is treated as having given notice of their desire to end or cancel their subscription contract. The amendment is important to ensure that the clause works as intended, and I hope Members agree that it necessary.

Clause 265 will ensure that any term in a subscription contract that conflicts with this chapter will have no legal effect. That includes any term that seeks to exclude or restrict a trader’s liability arising from the implied terms of this chapter. In cases specified in regulations under clause 269(1)(e), the clause will also prevent traders’ contract terms from allowing them to take a renewal payment before the day on which a subscription contract renews.

Clause 266 sets out that a consumer can seek legal remedies, other than those set out in the chapter, if a trader breaches a term of a subscription contract. They can claim those remedies, in addition to ones under this chapter, as long as they do not recover twice for the same loss.

Clause 267 ensures that the measures in the chapter will apply where a UK consumer and an overseas trader agree a contract governed by a foreign law if the contract has a close connection with the UK. Whether that is the case will depend on the circumstances, including whether the overseas-based trader targeted the consumer in the UK. That will ensure that traders cannot avoid providing UK consumers with the protections of this chapter simply by operating or structuring their operations overseas. The clause also makes it clear that the chapter applies only to new contracts and not to existing ones, reflecting the usual principle that new regulatory requirements should not operate retrospectively. Clause 268 sets out that this chapter applies to the Crown.

Clause 269 sets out the powers for the Secretary of State to make regulations in relation to a number of matters covered by this chapter, including regulations related to information and notices that traders must provide to consumers, arrangements traders must make to enable consumers to exit their contracts, and details regarding overpayments and refunds. Regulations may also restrict what notice period traders can require from consumers to end their contract. Most of the areas covered by this power involve matters of detail on which the Government will likely want to make different provision for different kinds of cases and contract models.

Clause 270 amends the Consumer Rights Act 2015. This ensures that pre-contract information given by a trader is treated as a binding term of the subscription contract that cannot be changed without the consumer’s express agreement. Clause 271 sets out consequential amendments to existing legislation—in particular, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

Clause 272 sets out how important terms and phrases in this chapter are to be interpreted, for clarity. Government amendments 80, 81 and 82 to the clause remove the words “pre-contract information” from the definition of “durable medium” to ensure that its definition is compatible with its use throughout the chapter. These amendments are important for accuracy of the Bill, and I therefore encourage Members to support their inclusion.

Finally, clause 273 provides an index of expressions used throughout this chapter, to make the chapter easier to navigate. I therefore invite Members to support Government amendments 79 to 82 and clauses 264 to 272.

I welcome the speed with which we are moving through these clauses. Clause 264 specifies the timing and burden of proof for information and notices that are given under this chapter. For the electronic communication of notices or information, the clause makes it clear that delivery would be deemed instantaneous, even if the consumer does not receive the notice due to a reason beyond the trader’s control.

Subsection (6) specifies that in a dispute as to whether any information or notice has been given to the consumer, the burden of proof would be on the trader. We welcome that provision. However, under subsection (7), the burden of proof would be on the consumer in any dispute regarding whether a notice to end a contract or cancel it was sent to the trader, or with regard to the timing of that notice.

While the Opposition recognise the need for a balanced burden of proof, I draw the Minister’s attention to the written evidence submitted by consumer group Which?, which states in relation to subsection (7):

“We think this is unfair as it would create a disproportionate burden on consumers in situations where consumers cancel via means under the control of the trader. An example of this would be completing an online form, from the traders website, where no explicit confirmation has been given that the subscription has been cancelled.”

Can the Minister outline, for the benefit of the Committee, what will happen in such cases, where the consumer must cancel through a means that cannot be easily used or saved as evidence of cancellation? Does he not accept that in such circumstances, placing the burden of proof on the consumer is impractical, so there may need to be additional protections?

Amendment 79 corrects a drafting error, so we support it. Clause 265 introduces provisions such that any term in a contract contravening the regulations in this chapter has no legal effect. We welcome the clause ensuring that traders are unable to work their way around these regulations and therefore support its inclusion in the Bill.

Clause 266 clarifies that any rights the consumer may have under common law for breach of any term of a subscription contract are not limited by rights specified in this chapter. We welcome the clause ensuring that consumers are able to exercise both kinds of right in combination, providing ease for consumers.

Clause 267 introduces provisions regarding the application of this chapter. It sets out that if a trader were to choose the law of another country to govern a subscription contract but the contract has a close connection to the UK, chapter 2 would still apply. We welcome this common-sense clause, which enables the regime to be effectively enforced.

Under clause 268, the Crown would be bound by the provisions in chapter 2 but would not be criminally liable as a result. It would be helpful for the Minister to clarify what those circumstances might be, so that we can understand the provision more clearly.

Clause 269 grants the Secretary of State a delegated power to make regulations in relation to how and when information or a notice required to be given by traders to consumers under chapter 2 may or must be given, what information notices given under chapter 2 must contain, what arrangements a trader must make under clause 252 to enable consumers to end contracts, and when a consumer may exercise such a right, specifying the period in which a trader must refund an overpayment. While the Opposition recognise the need for this delegated power, it is not clear to us why these regulations are being left to secondary legislation and are not on the face of the Bill. I would be grateful if the Minister could clarify that and the reason for the regulations being subject to the negative procedure.

Clause 270 makes consequential amendments to the specified sections of the Consumer Rights Act 2015 and will ensure that information given to consumers as part of the pre-contract information required under chapter 2 is treated as a term of the contract. In effect, traders would not be able to make changes to the matters covered by this pre-contract information without the agreement of the consumer. We welcome that provision.

Clause 271 makes further consequential amendments to other legislation, and we support it. Clause 272 sets out general interpretations for this chapter, including definitions of “business”, “consumer”, “goods”, “trader” and “working day”. We support the clause and welcome its inclusion. Amendments 80 to 82 have the effect of expanding the definition of “durable medium” for the purposes of this chapter. We support these amendments. Clause 273 provides an index of defined expressions in the clause. It is self-explanatory, and we support it.

The shadow Minister makes some fair points. In terms of the requirement for the consumer to prove cancellation, as she no doubt recognises, clause 6 contains obligations on the trader as well, to ensure that there is a burden of proof on them as to whether the information notice had been given by the trader to the consumer.

Clause 253 requires the trader to send an acknowledgment to the consumer that they received the notice to end the contract. We also address this in business and consumer guidance. This approach to burden of proof and the trader’s duty to confirm receipt of cancellation via their website is in line with the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. Businesses and consumer advice bodies are familiar with those regulations, and traders should be used to complying with them.

There is no policy justification for emanations and servants of the Crown not to be bound by this chapter if they are entering a contract with consumers of the kind regulated by this chapter.

We will certainly work with businesses, regulators and consumer groups in developing the regulations under these chapters to ensure they are fair and proportionate, and to make sure that the arrangements for things like how traders issue reminder notices work for both parties.

Amendment 79 agreed to.

Clause 264, as amended, ordered to stand part of the Bill.

Clauses 265 to 271 ordered to stand part of the Bill.

Clause 272

Interpretation

Amendments made: 80, in clause 272, page 180, line 35, leave out “pre-contract”.

This is a drafting amendment to expand the definition of “durable medium”.

Amendment 81, in clause 272, page 181, line 1, leave out “pre-contract”.

This is a drafting amendment to expand the definition of “durable medium”.

Amendment 82, in clause 272, page 181, line 4, leave out “pre-contract”.—(Kevin Hollinrake.)

This is a drafting amendment to expand the definition of “durable medium”.

Clause 272, as amended, ordered to stand part of the Bill.

Clause 273 ordered to stand part of the Bill.

Clause 274

Meaning of “consumer savings scheme contract”

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

Clauses 275 and 276 stand part.

That schedule 21 be the Twenty-first schedule to the Bill.

Clauses 277 to 282 stand part.

New clause 7—Regulation of consumer savings schemes

“(1) The Secretary of State must by regulations establish a system under which the Financial Conduct Authority has responsibility for regulating consumer savings scheme contracts.

(2) Regulations under this section—

(a) must be made within six months of this Act being passed, and

(b) are subject to the affirmative procedure.

(3) In this section, a ‘consumer savings scheme contract’ has the meaning given in section 274.”.

This new clause would make the FCA, rather than local authorities, responsible for regulating consumer savings scheme contracts.

Part 4, chapter 3 of the Bill introduces requirements that businesses operating consumer savings schemes such as Christmas savings clubs adequately protect consumers. Clause 274 defines consumer savings scheme contracts for the purposes of the Bill as including contracts that seek to incentivise members not to withdraw their money until a certain time.

Clause 275 sets out definitions. Clause 276 gives the Secretary of State the power to amend schedule 21 to exclude contracts or arrangements in specific sectors. That will ensure businesses are not subject to dual regulation and safeguards them from overburdensome or potentially contradictory regulations.

Schedule 21 provides a specific set of exclusions from the regulations for certain arrangements, including for small businesses with low-value schemes.

Clause 277 sets out that consumer savings schemes must be underpinned by arrangements covering the cost of refunding consumer payments in the event of the trader’s insolvency. It allows traders to choose trust arrangements or insurance. This is the heart of the regulations. Users of consumer savings schemes make payments in good faith expecting to be able to redeem their money at the end of the savings period, and these provisions will protect consumer payments and maintain confidence in the sector.

Clause 278 specifies the baseline requirements for traders choosing the insurance option. They include a requirement that it must be sufficient to return all moneys saved by scheme users not redeemed at the time of insolvency.

Clause 279 specifies minimum requirements for traders protecting payments via trust arrangements. Those requirements cover the protection of consumer moneys and also permitted uses of funds, ensuring they can only be used to supply the goods and services consumers signed up for.

Clause 280 places traders under a legal duty to convey certain information to a consumer about the protection mechanism used. That is necessary to ensure consumers can check their money is protected as required and know what to do if they need to reclaim it.

Clause 281 adds this part of the Bill to the Regulatory Enforcement and Sanctions Act 2008, which means that businesses with primary authority partnerships will be able to receive tailored advice, helping reduce the costs of compliance without reducing regulatory protections. Clause 282 defines certain terms in this part of the Bill.

New clause 7 seeks to create an enforcement role for the Financial Conduct Authority within six months of Royal Assent. When designing the provision, we considered who should undertake the enforcement role and concluded it was not appropriate for the FCA. Its primary role is to license and oversee banking and financial services before market entry. Consumer savings schemes are nearly all offered by retailers and groups that service the retail industry. The FCA has no existing relationship with many of these service providers. The Law Commission also considered whether savings schemes should be regulated as financial products by the FCA. It concluded that the additional burdens placed on the FCA in terms of resources would be disproportionate. In contrast, we believe that trading standards will be able to use their existing relations with business to oversee these rules. To that end, we have agreed to work with the Primary Authority Supermarkets Group to develop guidance for enforcers and traders. I hope the hon. Member for Bermondsey and Old Southwark will not press his new clause.

I have a couple of points; I will try to keep them brief. The clause fundamentally rejects where the Government suggest the responsibility for oversight of a savings scheme should sit. I was just listening to the Minister, and it is probably worth flagging up the message from the Chartered Trading Standards Institute on this. The Government say that they have assessed where this should sit; they say that they have worked with partners and consulted, but that does not seem to be the feeling of the chartered institute covering the sector, whose language is interesting:

“These brand new provisions have been inappropriately dumped on local authority trading standards to deal with, but it would be much better placed to give the Financial Conduct Authority the responsibility to regulate new provisions on savings schemes which are similar in nature to banking and other financial matters already regulated by the FCA. Saving schemes are often national schemes”—

such as Farepak, which Members will be familiar with. No individual local authority could have prevented what happened with Farepak; I think that is the point it is making. I will come back to its direct comments—

“and therefore should be in the remit of a national regulator with the experience and resources to deal with financial matters. CTSI would like to see all references to local authorities removed in these provisions and to pass on responsibility.”

The Minister says that the FCA is not the right vehicle or body. Perhaps there is space and time to examine what that body should be. The point made by trading standards is that they do not have the skillset to oversee financial services in the way that the Government are demanding. They do not have the resources—that is the point made in our evidence sessions. This follows 13 years of cuts to weights and measures—to trading standards—which we have seen across the country; there has been a 50% cut in their capacity to do the job. Again, this is the Government trying to insist that local government take on greater responsibility after cuts to their own resources.

Southwark is a case in point. We have seen similar cuts to trading standards, but also to the overall council’s budget. The Government reduce the responsibilities of central Government Departments, such as the Home Office, and pass on additional costs running into the millions for things such as emergency children’s services with no recourse to public funds, without giving additional resources to councils to do so. This is another case in point where the Government are trying to push a new power and demand on to an already overstretched and under-resourced arena.

New clause 7 would have made the FCA the relevant body, rather than local authorities, but the point of the new clause is that trading standards should not be made responsible for something when they do not have the expertise or resource to be effective. If the Government do not think it should be the FCA, it is up to the Government to come back and find the right body. It is the Government’s legislation; they want it to be effective, and for these saving schemes to not collapse and leave people without, so it is incumbent on the Government to come up with either the resources and skills—training, whatever it might take—for trading standards to do this, or an alternative body to oversee these specific saving schemes. It is important at this stage to flag that concern, because there is a deep resentment, almost, from the sector over the Government’s suggestion that trading standards take this on, yet the Government still insist that it is the appropriate vehicle.

I hope there is still time to review which alternative body might be able to take on this task. This feels like something that a national body should deal with, and it should not sit with local authorities as operators and rogue traders may cover whole regions of the country, not one single local authority. I did listen to the Minister, and take onboard his suggestion that the FCA is not necessarily the right vehicle, therefore I am prepared to withdraw this amendment, as drafted, but I would like to see a commitment to reconsider where this responsibility sits.

Clause 274 introduces the definition of a “consumer savings scheme contact” for the purposes of this chapter. Specifically, the clause defines it as a contract under which the consumer makes payments to a trader,

“the trader credits those payments to an account that is held by the trader for the consumer…and the payments credited to the consumer’s account provide a fund for the consumer to redeem as goods, services or digital content”.

The definition forms part of new provisions introduced by this chapter which are important for protecting consumers who use consumer savings schemes, and we welcome this. Clause 275 defines other terms used in this chapter—and in clause 274—and we welcome the further clarity this brings.

Clause 276 introduces schedule 21, which sets out arrangements that are excluded from the scope of a consumer savings scheme contract. It includes regulated financial services activities, arrangements for the supply of utilities, a contract between a consumer and a trader where the trader’s turnover is less than £1 million per year, childcare voucher schemes, and package holidays .

We welcome that exclusions might be necessary in cases where it is impractical for these regulations to apply. However, I would welcome some further clarification on paragraph 3 of the schedule to set out how contracts offered by small businesses are exempt. Is that in relation to wanting to have the right balance between smaller businesses and consumers? We obviously want to ensure that the consumer is as protected as possible in these contracts, so I would be grateful for a response from the Minister on that.

Clause 277—“insolvency protection requirement”—introduces provisions regarding the event of a trader’s insolvency and covering the costs of returning to the consumer any protected payments at the time of the insolvency. We do welcome that, and it is important in the context of record levels of insolvencies. It is a particularly unstable period, and it is important for consumers to have protections.

Clause 278 sets out what is understood to be an “appropriate policy” in the instance of a trader complying with the provisions in clause 277 by taking out an insurance policy. Under the Bill, an appropriate policy is one in which consumers are insured with cover for the refunding of prepayments held in the consumer’s account that have not been redeemed at the time of insolvency. The insurer must also be authorised by UK authorities. We welcome this clause, though I ask the Minister to expand on subsection (3), which requires the trader to

“meet the costs of arranging and maintaining an appropriate policy”

and explicitly inhibits traders passing that cost on to consumers.

I would be grateful for two things. First, will the Minister explain how we can be confident that the trader will not find a way to pass on this additional cost to the consumer? Secondly, will the Minister confirm how quickly, in the event of insolvency, consumers can expect to have their prepayment refunded? It would be helpful if he could clarify that. Does he feel that provision is tight enough in the Bill?

Clause 279 applies in circumstances where a trader complies with the insolvency protection requirements in clause 277 by using a trust arrangement. It sets out how it must ensure consumer prepayments are held in a trust located in the UK. The consumer’s prepayments must also be held in a trust until either the funds have been redeemed or the payments have been returned to the consumer. Similarly to clause 278, the Opposition welcome this clause as providing greater protections under consumer savings schemes in circumstances where the trader becomes insolvent.

I refer the Minister to subsection (7), which requires the cost of administering the trust to be paid for by the trader. Again, how will the Minister be able to safeguard against the trader passing this additional cost on to the consumer?

Clause 280 sets out the information requirements attached to this chapter. Specifically, it sets out that, within 30 working days of the consumer’s first payment into the savings scheme, the trader must provide:

“the name, address, telephone number and email address of the insurer or trustees responsible for protecting the consumer’s payments;

where insurance arrangements are in place, the policy number for the policy under which the consumer’s payments are protected;

where trust arrangements are in place, a copy of the trust deed under which the consumer’s payments are held.”

It is a welcome provision, but will the Minister expand on the 30-day time period? On what basis does the Minister believe that the trader would need 30 days to put these arrangements in place? Would these arrangements not happen automatically as soon as the consumer enters the scheme? That is an important question for ensuring that the consumer is informed of their protections.

Clause 281 would add chapter 3 of part 4 of the Bill to the list of enactments in schedule 3 of the Regulatory Enforcement and Sanctions Act 2008. We welcome the clause.

Clause 282 introduces definitions for the purposes of this chapter. Similarly, we welcome the clause in providing the transparency, consistency and clarity needed.

The hon. Member for Bermondsey and Old Southwark thinks that trading standards is not the right body; the Government think that it is, and that position—of it not being the Financial Conduct Authority—is supported by the Law Commission. These are clearly not financial products. They are not defined as such in the relevant legislation.

Trading standards already has a business relationship with supermarkets. There is already a Primary Authority Supermarkets Group in the trading standards network; it therefore seems logical, given that supermarkets will probably be offering these kinds of services, that this should be handled by trading standards.

Why does the Minister think that the Chartered Trading Standards Institute does not want this responsibility?

That is not the feedback that I have heard. I am very happy to see the information that the hon. Member has in front of him and to try to meet those concerns of the trading standards body. Trading standards is the most relevant body in our view; the hon. Gentleman may take a different view, and he is entitled to do so.

The shadow Minister mentioned small businesses. The small businesses that are excluded are those with an annual turnover of less than £1 million and collect less than an average of £10 a month from customers, so we do not see those as having the same potential detriment as with other, larger organisations.

As for traders passing on the costs of the insurance or the trust, they are clearly prohibited from doing so in this legislation. There is a requirement, as the hon. Lady will have seen, for the accounts of a relevant trader to be audited every three years; we would expect those checks to take place at that point to ensure that it was being done appropriately.

On payments being made, clearly that will be a case for either the insolvency practitioner or the insurance company, but we would expect that fees held in trust would be rapidly returned to people who were due to have their money returned. On the shadow Minister’s point about 30 days, well, it is

“before the end of 30…days”,

so the information may well be provided, as she would desire, much more quickly than that.

Question put and agreed to.

Clause 274 accordingly ordered to stand part of the Bill.

Clauses 275 and 276 ordered to stand part of the Bill.

Schedule 21 agreed to.

Clauses 277 to 282 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mike Wood.)

Adjourned till Tuesday 11 July at twenty-five past Nine o’clock.

Written evidence reported to the House

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