Section 38: Removal of the Council's functions in relation to Northern Ireland

107.     Section 38 provides that if the Secretary of State is content that a body other than the Council is to exercise the Council's functions in relation to Northern Ireland, then he may repeal the relevant parts of this Act that extend the functions of the Council to postal services matters in Northern Ireland. Before making an order under this section the Secretary of State must consult the Council and anyone else he thinks appropriate.

Section 39: The Financial Services Consumer Panel

108.     Section 39 inserts new subsections (5A) to (5C) into section 10 of the Financial Services and Markets Act 2000 (c.8). These allow the Secretary of State to direct the Financial Services Authority to appoint a non-executive member of the Council to the Financial Services Consumer Panel.

109.     Paragraph 1(4)(a) of Schedule 1 to the Act enables the Secretary of State to appoint a member of the Financial Services Consumer Panel to the Council.

Section 40: The OFCOM Consumer Panel

110.     Section 40 inserts new subsections (4A) to (4C) into section 17 of the Communications Act 2003 (c.21). These allow the Secretary of State to direct the Office of Communications to appoint a non-executive member of the Council to the OFCOM Consumer Panel.

111.     Paragraph 1(4)(b) of Schedule 1 to the Act enables the Secretary of State to appoint a member of the OFCOM Consumer Panel to the Council.

Section 41: Interpretation of Part 1

112.     This section contains interpretation provisions in relation to Part 1 of the Act.

113.     This section does not define water or sewerage undertaker. The Interpretation Act 1978 (c.30) provides that these terms should be construed in accordance with section 6 of the Water Industry Act 1991 (c.56) which relates to the appointment of water and sewerage undertakers.

PART 2: COMPLAINTS HANDLING AND REDRESS SCHEMES

Overview of Part 2

114.     Sections 42 to 52 set out the arrangements being introduced for the handling of complaints made by consumers to service providers in the electricity, gas, postal services and water sectors. In particular, this part will require the Gas and Electricity Markets Authority and the Postal Services Commission to make regulations to prescribe complaint handling standards that will be binding on persons who are "regulated providers" (as defined in section 42) in the electricity, gas and postal services sectors (see section 43). This Part also enables the Secretary of State to make orders to require "regulated providers" in the electricity, gas, postal services and water sectors to belong to an approved redress scheme (see section 47).

Section 42: Interpretation of Part 2

115.     Section 42 defines the key terms used in Part 2. In particular, this section defines the service providers and consumers in relation to whom the powers under Part 2 may be exercised ("regulated provider" and "relevant consumer"). This section also specifies the regulators who may exercise the powers under this Part ("relevant regulator").

Section 43: Standards for handling complaints

116.     Section 43 places a duty on the Gas and Electricity Markets Authority and the Postal Services Commission to make regulations prescribing complaint handling standards that are binding on service providers. Such regulations will prescribe standards in relation to the way in which service providers handle complaints received from consumers (e.g. they might prescribe maximum response times). Regulations made under this section are not subject to any Parliamentary procedure; however, they may be made only with the consent of the Secretary of State (subsection (4)).

117.     Under subsection (6) and (7), this section provides for the Secretary of State to make an order prescribing a date on which this duty on regulators to prescribe complaint handling standards will change to a power to prescribe such standards. Before making the order the Secretary of State must consult the regulator, the new Council and other persons as appropriate (subsection 8).

118.     The power to prescribe complaint handling standards does not apply to the water sector (subsection 9). This is because the Secretary of State already has power to impose complaint handling standards in relation to water undertakers and sewerage undertakers under the Water Industry Act 1991 (c.56) in relation to the water sector in England and Wales.

Section 44: Requirements for making regulations under section 43

119.     Section 44 sets out the procedure that the Gas and Electricity Markets Authority and the Postal Services Commission must follow before making regulations to prescribe complaint handling standards. In particular, the regulator must publish a notice of its proposals, consult people likely to be affected and consider any representations made. Actions taken prior to the commencement of the provisions of this section may count as complying with requirements on the regulator under this section.

Section 45: Information with respect to compliance with complaints handling standards

120.     Section 45 requires the Council to publish statistical information in relation to regulated providers' levels of performance in complying with any complaint handling standards prescribed under section 43 by the Gas and Electricity Markets Authority and the Postal Services Commission.

121.     Subsection (4) gives effect to Schedule 5 which amends the Electricity Act 1989 (c.29), Gas Act 1986 (c.44) and Postal Services Act 2000 (c.26) to require the Gas and Electricity Markets Authority and the Postal Services Commission to collect information from licence holders in respect of levels of compliance with any complaint handling standards prescribed by these regulators under section 43 of the Act. The above regulators are given the power to direct licensees to provide them with the information

Section 46: Supply of information to consumers

122.     Section 46 enables the Gas and Electricity Markets Authority and the Postal Services Commission to make regulations to require regulated providers to provide consumers with information about any complaint handling standards prescribed by the regulator and about the regulated provider's levels of compliance with those standards

123.     Subsection (2) provides for the regulator to specify the form and manner of this information, and the frequency with which, it is to be given.

Section 47: Membership of redress scheme

124.     Section 47 enables the Secretary of State to make orders to require regulated providers to belong to a redress scheme (as defined in section 48(1)). The redress scheme must be one approved by the relevant regulator, or a scheme administered by the Secretary of State or by a person appointed by him and designated by him as an appropriate redress scheme (in which case the Secretary of State must be satisfied that it meets the criteria for approval by the relevant regulator - see section 47(8)).

125.     "Redress scheme" is defined in section 48(1) as "a scheme under which consumer complaints may be made to, and investigated and determined by, an independent person ("the independent person")". For this purpose, the "independent person" must be independent of the provider against whom the complaint is made and independent of the relevant regulator in respect of that provider (section 48(2)).

126.     The Secretary of State may limit the requirement to belong to a redress scheme to schemes which deal with certain types of complaint. Hence, it would be possible to exclude complaints in relation to certain matters from the requirement to belong to a redress scheme (subsections (2) to (3)). Before making an order to require regulated providers to belong to a redress scheme, the Secretary of State must consult the relevant regulator and persons who appear to be representative of persons who have an interest in the matter (subsection (4)). A consultation conducted prior to the commencement of the provisions of this section will count as complying with requirements on the Secretary of State under this section.

127.     Subsection (6) requires the Secretary of State to seek the consent of Welsh Ministers before making an order which relates to a water undertaker or sewerage undertaker for an area which is wholly or mainly in Wales.

128.     Subsection (7) provides that the Secretary of State may not make an order under this section unless he is satisfied that there is (or will be when the order comes into force) at least one redress scheme which each regulated provider to whom the order applies is able to join and which will satisfy the requirement imposed by the order. This is to ensure that the Secretary of State may not make an order requiring providers to belong to a redress scheme in circumstances where the providers subject to the order are unable to join a scheme since none exists.

129.     Subsection (9) enables the Secretary of State to establish or administer a redress scheme. In practice, it is expected that suppliers or a trade association will establish their own redress scheme in respect of which approval will be sought for the purposes of any order under this section. However, in the event that business does not establish a scheme itself, the Secretary of State has the power to establish one.

Section 48: Membership of redress schemes: supplementary

130.     Section 48 defines the key terms in relation to redress schemes.

131.     Subsection (3) provides that an approved redress scheme may admit persons who are not required to belong to such a scheme and that it may investigate matters other than those to which the duty to belong to a redress scheme applies.

132.     Subsection (4) provides that, for the purposes of the law of defamation, proceedings before a redress scheme will be treated in the same way as court proceedings. The effect of this is to allow the redress scheme to conduct investigations and determinations freely without the threat of defamation proceedings. Similar provision exists for most other statutory redress schemes.

Section 49: Approval of redress schemes

133.     Section 49 sets out the matters to be taken into account by the regulator in giving approval for a redress scheme.

134.     Subsection (1) specifies various matters that the relevant regulator must have regard to when deciding whether to approve a scheme. These include any criteria that, in the opinion of the regulator, constitute generally accepted principles of best practice in relation to redress provision which could reasonably apply to the scheme. An example of such principles would be the guidelines provided by the British and Irish Ombudsman Association (www.bioa.org.uk).

135.     Subsection (2) requires the regulator to have regard to the number of other redress schemes in relation to regulated suppliers when the regulator decides whether to approve a scheme. This is intended to avoid a proliferation of redress schemes as this could be confusing for consumers.

136.     Subsections (3), (6) and (7) set out various conditions that a redress scheme must satisfy in order to be approved by a relevant regulator.

Section 50: Approval of redress schemes: supplementary

137.     Section 50 provides that the regulator may determine the manner and form etc of an application for approval of a redress scheme. Changes to an approved scheme must be notified to the regulator within 14 days of any change. The regulator has power to withdraw approval of a redress scheme generally or in relation to consumer complaints of a specified description including in relation to complaints made on or after a specified date.

Section 51: Procedure for refusing or withdrawing approval

138.     Section 51 sets out the procedure that the relevant regulator must follow when refusing approval for, or withdrawing approval from, an approved redress scheme.

139.     Subsection (1) requires the relevant regulator to give the scheme administrator notice of the fact that it proposes to refuse or withdraw approval. The notice must give the reasons why the regulator proposes to refuse or withdraw approval and specify a time during which the scheme administrator may make representations to the regulator.

140.     Subsection (2) provides that the regulator must notify the scheme administrator of its decision and the reasons for its decision.

141.     Subsection (3) provides that the regulator must also notify the Secretary of State of its decision to withdraw approval from a redress scheme.

142.     Subsection (4) provides that the regulator must also notify each member of the scheme of its decision to withdraw or refuse approval of the scheme.

143.     Subsection (5) provides that withdrawal of approval of a redress scheme takes effect from the date specified in the notice withdrawing the approval (under subsection (2)).

144.     Subsection (6) provides that the Secretary of State must follow the procedures set out in this section (other than those in subsection (3)) if he has appointed a person to administer a scheme under section 47(1)(b) and decides to revoke that appointment.

Section 52: Enforcement of requirements imposed under Part 2

145.     Section 52 makes provision in relation to the enforcement of complaint handling standards prescribed by a regulator under Part 2 of the Act and in relation to any requirement to belong to a redress scheme which has been imposed by the Secretary of State by order under Part 2. These requirements will be enforced under the regulatory regimes in the electricity, gas, postal services and water sectors (where appropriate).

146.     Subsections (1) to (4) make amendments to the relevant legislation to provide for this. The effect of the enforcement provisions is that the relevant regulator may impose an order to secure compliance with the above requirements. The service provider is obliged to comply with such an order and breach of the order can be enforced in the civil courts. Breach of such an order may also render the service provider liable to pay damages to any person who has suffered loss as the result of that breach. In addition to the above, sectoral legislation permits the regulator to impose a financial penalty for breach of the above requirements.

PART 3: AMENDMENTS OF THE ESTATE AGENTS' ACT 1979

Estate agents' duties

Section 53: Membership of redress schemes

147.     Section 53 introduces Schedule 6 which amends the Estate Agents Act 1979 (c.38) to enable the Secretary of State, by order, to require persons engaged in estate agency work to join a redress scheme dealing with complaints from buyers and sellers of residential property. In addition, the section amends section 3 of the 1979 Act by adding engaging in estate agency work when in breach of the duty imposed by such an order to the list of grounds on which the OFT may determine whether a person is unfit to carry on estate agency work.

148.     This section also repeals sections 172 to 174 of the Housing Act 2004 (c.34) (which give the Secretary of State the power to require estate agents to belong to a redress scheme in relation to complaints regarding Home Information Packs ). The intention is to bring the repeal of sections 172 to 174 into force when an order made under the Estate Agents Act 1979 (as amended by Schedule 6) comes into force.

Section 54: Duty to keep records

149.     At present, it is an undesirable practice under the 1979 Act for an estate agent to fail to pass on an offer to the seller promptly and in writing (except where the client has indicated that he does not want particular types of offer to be passed on), or to misrepresent an offer (see Articles 1 and 2 and Schedule 3 to the Estate Agents (Undesirable Practices) (No.2) Order 1991). An undesirable practice is one of the triggers for considering a person's fitness to engage in estate agency work under section 3(1) of the 1979 Act and hence can lead to a prohibition order. However, estate agents are not currently required to maintain records of offers made and passed on.

150.     The section inserts a new section 21A in the 1979 Act. Subsection (1) of the new section introduces a requirement for persons engaged in estate agency work to keep records (referred to in the section as "the permanent records"). Subsection (3) requires persons engaged in estate agency work to ensure that records of certain information and events are included in those records. The details of what must be included are specified in subsection (4) (e.g. information to clients regarding their prospective liabilities to the person carrying on estate agency work, information about offers and other information of a description prescribed by the Secretary of State). The records must be kept for a period of at least six years. The period of six years is the period for which accounting records under the Estate Agents (Accounts) Regulations 1981 ⁹ have to be kept and is also the basic limitation period for most claims.

⁹ SI 1981 No. 1520 The Estate Agents (Accounts) Regulations

151.     The new section makes special provision for persons who are engaged in estate agency work as employees. The duty under subsection (1) to keep records is that of the employer and not the employee (see subsection (2)). But the duty under subsection (3) does apply to employees so they must, for example, ensure that information about offers received by them is included in the records. Under subsection (5) employers, as well as employees, are also required to ensure that records are kept up to date in this way, but the employer is not in breach of the duty if he can show that he took such steps as were reasonably practicable to ensure that his employees complied with their duty. Regulatory action can be taken against the employer for failing to keep records or to keep them up to date (subject to the defence just mentioned) and against the employee for failing to keep the records up to date.

Section 55: Grounds for prohibition orders

152.     Section 3(1) of the 1979 Act lists the triggers which allow the OFT to consider the fitness of an estate agent. Subsection (2) of this section amends section 3(1) so that the OFT can consider the fitness of estate agents where they have committed an offence even if the individual has not been convicted of the offence. For example, the individual may have accepted a police caution, or the OFT may have evidence from Trading Standards Officers or the Financial Services Authority of an offence having been committed where these authorities do not wish to prosecute for some reason (e.g. the FSA may decide to revoke someone's authorisation instead).

153.     In addition, subsection (3) further widens the circumstances in which the OFT can consider a person's fitness to engage in estate agency work to include circumstances where an estate agent has breached a statutory undertaking given to the OFT under section 217, 218 or 219 of the Enterprise Act 2002 (c.40) or breached an enforcement order made against him under section 217 of that Act in relation to estate agency work.

154.     Subsection (4) of the section provides that section 5(4) of the 1979 Act is omitted. Section 5(4) provides for the automatic revocation of orders based on a conviction which becomes spent. Its repeal means that an individual who is subject to a prohibition order on the basis that he has committed an offence and who has been convicted of that offence will have to apply to the OFT to have the prohibition order revoked when the conviction becomes spent. The OFT would be expected to revoke the order in these circumstances. An individual who is subject to a prohibition order due to having committed an offence but who has not been convicted of the offence will also have to apply to the OFT to revoke the order, after a suitable period of time, should they wish to practise as an estate agent again.

155.     Subsection (5) amends paragraph 1 of Schedule 1 to the 1979 Act. The amendment makes it clear that in determining whether to make a prohibition order on the ground set out in section 3(1)(a) (as amended) the OFT may not rely on convictions that have become spent.

Section 56: Grounds for warning orders

156.     In the same way that section 55 widens the circumstances in which the OFT can consider whether a person is fit to engage in estate agency work, potentially leading to a prohibition order, this section widens the circumstances in which the OFT can consider issuing a warning order to an estate agent under section 4(1) of the 1979 Act. Section 4(1) currently provides that a warning order may be issued where a person carrying on estate agency work has failed to comply with an obligation imposed on him under sections 15 or 18 to 21, or has engaged in an undesirable practice as mentioned in section 3(1)(d), and were he again to fail to comply with such an obligation or continue to engage in that practice the OFT would issue a prohibition order against him. Subsection (2) of section 56 extends the circumstances in which warning orders may be issued to include engaging in estate agency work in breach of a duty to belong to a redress scheme, failure to comply with any requirement imposed under sections 9(1) or 11(1A)(b) and breach of a statutory undertaking or an enforcement order under the Enterprise Act 2002.

157.      Subsections (3) to (5) contain further amendments to section 4 which are consequential on the amendments made by subsection (2).

Investigatory powers

Section 57: Powers of entry and inspection

158.     This section widens the powers of entry under the 1979 Act. At present, under section 11 of the 1979 Act, enforcement officers have the power to enter premises when they have reasonable cause to suspect that an offence has been committed. This section extends the power so that enforcement officers can enter premises not only when there is reasonable cause to suspect that an offence has been committed but also where the enforcement officer has reasonable cause to suspect that a breach of the obligations listed under subsection (1)(b) of section 11 (as amended), or an undesirable practice, has occurred. The power is to be used to establish whether the specified breach or undesirable practice has occurred.

159.     New subsection (1A) sets out the powers which are for the enforcement officer to enter premises, to require anyone connected with the business to provide him/her with any books or documents (including requiring that documents held on a computer related to the business be produced in a legible form) and to make copies of any books, or documents provided. This re-enacts with minor amendments the provision currently made by section 11(1)(b).

160.     New subsection (1B) allows an officer to seize and detain the originals of any books or documents provided they may be required as evidence for use in proceedings that might follow. This replaces the current power in section 11(1)(c) to seize and detain documents and widens the circumstances in which the power is exercisable. In addition, new subsection (1C) allows an enforcement officer to seize and detain a book or document where it is not possible to take a copy of it or of an entry in it. These subsections are qualified by the new subsections (1D), (1E) and (1F), as well as subsections (2) and (3) of section 11.

161.     Subsection (3) further amends section 11. Section 11(4) currently only allows a warrant to be issued when there are grounds to believe that an offence has been or is being or is about to be committed or that there is documentary evidence on the premises that is likely to reveal that an offence has been committed, and that admission to the premises has been or is likely to be refused or that giving notice would defeat the object of the entry. The new subsections (4), (4A) and (4B) are wider and, in addition to the existing circumstances under section 11, allow a warrant to be issued if there is reason to believe that an estate agent has breached any of the obligations under the Act specified in subsection (4A)(a), or has engaged in an undesirable practice. At least one of the conditions in subsection (4B) must also be satisfied for a warrant to be granted.

Section 58: Failure to produce information

162.     This section provides a new power where a person has failed to provide to the OFT (under section 9 (1) of the 1979 Act) or to an enforcement officer (under section 11(1A)(b)) information, books or documents that have been required to be produced. The OFT or the enforcement officer can apply for a court order to require the "defaulter" to produce the information, books or documents asked for, or to take such other steps as may be specified in the order. This section also makes consequential amendments to section 9 and section 27 of the 1979 Act.

PART 4: MISCELLANEOUS AND GENERAL

Section 59: Contracts concluded away from business premises

163.     This section enables the Secretary of State to make regulations which give consumers the right to cancel contracts concluded in their home or at their workplace with a trader whom they invited to visit them there. Consumers already have rights to cancel contracts where the trader's visit was unsolicited ¹⁰. The Secretary of State will set out the details of the new rights, and the circumstances in which they will apply, in the relevant statutory instrument.

¹⁰ SI 1987 No 2117 Consumer Protection (Cancellation of Contracts Concluded away from Business Premises) Regulations