Ministers seek to stamp out rip-offs with new consumer protections

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An arsenal of planned reforms to boost competition and shield the public from rip-offs as the UK builds back fairer from the pandemic have been unveiled by the Business Secretary Kwasi Kwarteng.

The government will change the law so prepayment schemes like Christmas savings clubs have to safeguard customers’ money, protecting consumers’ cash as they save for the holidays. The change will prevent scandals like Farepak happening again, where tens of thousands of people, many on low incomes, lost all they had saved for Christmas when the company went bust.

For the used car and home improvement sectors, where consumers often make large, important one-off purchases, the government will make it mandatory for businesses to take part in arbitration or mediation where disputes arise over a transaction. This means both sides won’t get dragged through the courts and levels the playing field for decent businesses who are doing the right thing.

Government is also clamping down on subscription traps by requiring businesses to make it clear exactly what consumers are signing up for and letting them cancel easily, to ensure people can spend their hard-earned cash with confidence.

The consumer catfishes behind bogus online ratings will also be targeted by rules that make it automatically illegal to pay someone to write, or host, a fake review.

The government will help regulators stamp out other dodgy tactics used to dupe online shoppers. These include ‘dark patterns’ that manipulate consumers into spending more than they wanted to, and ‘sludges’, negative nudges such as when businesses pay to have their product feature highly on a trader’s website while hiding the fact they paid for it.

Business Secretary Kwasi Kwarteng said: “The UK’s economic recovery relies on the strength of our open markets and consumers’ faith in them. By delivering on our commitment to bolster our competition regime, we’re giving businesses confidence that they’re competing on fair terms, and the public confidence they’re getting a good deal. The proposals come in the new consultation on Reforming Competition and Consumer Policy, which delivers on the government’s manifesto commitment to give the Competition and Markets Authority enhanced powers to tackle consumer rip-offs and bad business practices.”

Tough penalties for non-compliance are being put forward, with new powers for the CMA and similar enforcers to hit unscrupulous traders who breach consumer law with fines of up to 10% of their global turnover, and civil fines for businesses who refuse or give misleading information to enforcers.

Industry reaction

Rocio Concha, Which? Director of Policy and Advocacy, said: “It is positive that the government is moving to give the competition and consumer regulator greater powers to take strong enforcement action which will address issues with the current system and help tackle business practices that harm consumers. The pandemic has highlighted weaknesses in UK consumer protections that have allowed unscrupulous businesses to exploit customers, while our competition regime has been in need of an update to deal with the challenges of digital markets. The government must now ensure that these proposals are swiftly implemented, and are underpinned by the right resources at a local and national level, so that consumer protection is strengthened.”

Matthew Upton, Director of Policy at Citizens Advice, said: “Consumers face a constant barrage of tricks designed to make them spend more money than they wanted – and often more than they can afford. In particular, we have long called for an overhaul to stop people from being trapped in subscriptions they no longer need, want or possibly even knew they had. We welcome protections that will help consumers navigate the ever-changing landscape of how they buy goods and services. The proposals to give the Competitions and Markets Authority more powers to crack down on businesses that don’t play fair are essential to this.”