Monday 19 April 2021 2:00 pm

We need tougher consumer protection to end the hours of hold music when things go wrong

Rocio Concha is Director of Advocacy and Policy at Which?

It might have been for your cancelled two-week summer holiday. Or it could have been that parcel you ordered that never arrived. First comes the disappointment and frustration, then the dread. You are now staring down the barrel of what could be a lengthy, painful battle with a customer service team to get your money back. The hold music, at first jolly, quickly becomes intolerable, as does the subsequent protracted email exchange. The whole process, seemingly balanced in favour of the company from the start, leaves you feeling helpless until you eventually accept defeat and walk away. 

If this sounds familiar, then you’re not alone. It is estimated that around a third of consumers experience a problem with a product or service each year, yet only half who then pursue a complaint resolve their problem satisfactorily. John Penrose MP’s independent report correctly recognised that to unleash the potential of UK businesses, and enable consumers to have confidence in them, we must also have a robust system which enables efficient remedies when things go wrong.

In fact, there is already a system – Alternative Dispute Resolution (ADR) – to help consumers with their complaints. When the system works, it works well and thousands of consumers use this service every year to get back money that they were owed by companies that have failed to correct a mistake or deliberately ripped them off. 

ADR comes in when a third party is required to intervene in a dispute between a consumer and business. There are 50 approved schemes in the UK, overseen by eight “competent authorities”. Most regulated sectors (financial services, energy, water and telecoms), have a single mandatory ADR scheme, though there are exceptions such as the aviation sector that is regulated but ADR is voluntary and as a result many airlines have chosen not to join. Unregulated sectors such as travel agents, home improvements, car sales and servicing or retail also have ADR schemes but again, companies are not required to join and several haven’t. This leaves consumers with nowhere to turn if things go wrong, except for relatively expensive legal options.

If you’re confused by this, then you’re not alone. But it is within this fragmented patchwork of voluntary and often overlapping schemes that consumers are being most adversely affected. Timescales for resolving a dispute can also drag on for months, and the feeling of powerlessness is compounded when companies can walk away from decisions they don’t like. Take Ryanair’s decision to quit AviationADR after it was ordered to pay thousands of passengers who had flights cancelled due to strike action. The airline saved millions in compensation payments while leaving consumers in the lurch and out of pocket.

Government action is clearly required, as we have set out in our report today. For ADR to become the effective dispute resolution system it could be, three main things must happen. 

First, the government should create a single mandated Ombudsman scheme for key sectors where transactions are complex or high value and where there are currently a large number of complaints. This already exists for most regulated sectors, but mandatory schemes in sectors such as aviation, car sales and servicing, home improvements and all aspects of property would help to level the playing field for consumers in these areas. 

Second, all ADR schemes should be overseen by an effective competent authority, armed with appropriate resources and powers. Some already are – take Ofgem for gas and electricity, the Financial Conduct Authority for financial services. But a single authoritative body should be mandated by the government to agree performance standards for ADR schemes in every sector and be there to support competent authorities. 

Third, ADR schemes need to be efficient and accountable. Consumers should be able to expect maximum time periods for each step in the process and guarantees that companies will comply with ADR decisions, underpinned by contracts that can be enforced in court if necessary. All approved ADR schemes should commission annual independent surveys of consumer trust and satisfaction to monitor their effectiveness. 

A system that helps consumers and businesses resolve a dispute fairly and efficiently is in both parties interests. Work has already been done on how post-Brexit and post-pandemic Britain has the opportunity to redesign and strengthen consumer policy for the better, which is good to see. A climate where businesses can thrive and consumers have the right protection are not mutually exclusive ambitions. The government has an opportunity to make the system fairer and more accountable for consumers – it should take the opportunity to do so. 

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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