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ADR: A Government consultation

On 20 June 2021 the Government finally published its consumer paper for consultation titled Reforming Competition and Consumer Policy. The closing date is for responses to the consultation is 11.45am on 1 October 2021.

The document is 147 pages long! So, I am going to do a summary/opinion piece on areas of the consultation.

I will start with Alternative Dispute Resolution (ADR). It can be complicated but over the last 6 years I have been recognised in the consumer world for my expertise and knowledge in the area and often get called upon in the media to talk about ADR due to this.

See ADR – all about it for World Ombudsman Day lists all my work in this area.

See Reviews: A Government Consultation and Subscriptions: A Government Consultation for response on subscription traps.

ADR falls within the section of Consumer Law Enforcement.

Marcus Williamson and I co-wrote two research reports on Alternative Dispute Resolution (ADR).

Report cover CDRL, CTSI, CAA, OA, Dean Dunham,The first was Ombudsman Omnishambles:  Serious unresolved issues affecting the operation of the ombudsman ADR system in the UK. (OO) in June 2016

The second was More Ombudsman Omnishambles: The UK ADR landscape 20 months on… in February 2018 (MOO). These were both highly critical of the Chartered Trading Standards Institution (CTSI) and of Civil Aviation Authority (CAA) in particular for their approval and monitoring of ADR schemes. Many of the issues raised in both these reports remain unresolved.

The Government is looking at examining ways to “mainstream” ADR, so it not seen as an alternative to court but becomes an integral part of the justice system. It currentlu aims to increase the scope of ADR and the rate of consumer disputes being satisfactorily resolved.

The consultation is looking at responses to three areas.

Summary of one section of the Reforming Competition and Consumer Policy consultation:

“Government believes a well-functioning ADR system can make markets work more effectively and drive economic growth, as it increases consumers’ confidence in spending and generates higher trader compliance with the law. However, responses to the Consumer Green Paper suggest that a number of improvements need to be made to improve the quality and scope of ADR so that it delivers for more consumers and businesses in all markets. In this chapter, government is seeking views on three specific improvements that were highlighted by respondents:

Improving consumer awareness and signposting – the current landscape for accessing redress is confusing and the process varies across markets. This is dissuading consumers from seeking private redress and enforcing their consumer rights.

Responses to the Consumer Green Paper said that consumers still find it difficult to understand their redress options, make the right choice for them and navigate the routes to resolving their problem, particularly if they are vulnerable.”

“Speeding up access to ADR  – In regulated markets, the majority of disputes are resolved within four weeks, but most regulators have typically set an upper limit of eight weeks for businesses to resolve complaints before consumers are entitled to take a dispute to ADR.

Government is looking for views on whether regulators should aim to set a significantly lower threshold for consumers to exercise their right to access ADR and if so whether exceptions could or should be made to allow more time to resolve complex cases.

“Improving the take-up of ADR by businesses in non-regulated markets – Business participation in ADR is particularly low in non-regulated sectors with a high number of SMEs and microbusinesses. This is concerning if those sectors are also ones where consumers are experiencing high levels of harm.”

The following is summarised from the policy. Pages 116 – 127 in the section titled “Supporting consumers enforcing their rights independently”

Improving Alternative Dispute Resolution

“Government proposes to require that all providers of consumer ADR are assessed and approved for their ability to provide an ADR service. Currently there are numerous non-accredited and unsupervised providers that offer dispute resolution on an informal basis alongside accredited providers.

Mandatory approval by the Competent Authority would mean that all providers operate to a common set of quality standards and oversight.”

It intends to strengthen the minimum service expectations of all ADR providers, focusing on four key principles to improve the quality of ADR – “neutrality, efficiency, accessibility, and transparency”.

“Government proposes to amend the ADR regulations, building on its existing framework to incorporate additional requirements for ADR providers, both as part of their initial accreditation and as part of their service provision to consumers and businesses. “These would include strengthening the accreditation process through the introduction of a ‘fit and proper persons’ test for key personnel to ensure that businesses owners, officers and senior management are suitable people to undertake those roles.”

It is generally mandatory for traders to participate in ADR schemes in the regulated sectors. For sectors where participation is voluntary, there is little engagement for a number of reasons. In the unregulated sectors, house and garden maintenance services, vehicle maintenance and repair services, and used cars are the sectors where consumers spend the most money so can receive the most harm.

“Government is considering a charge of £10-20 to consumers, with this being recoverable from the business if their case is upheld. There is a precedent for this in the aviation sector. “To address these concerns and deter frivolous or low value complaints, government is seeking views on whether ADR providers should be able to implement a lower limit on the value of claims. This would be balanced to ensure only higher value claims are in scope but not to significantly restrict consumers’ access to ADR.”

“Government is looking at incentivising businesses and consumers to use ADR on a voluntary basis. Responses to the Consumer Green Paper and further stakeholder engagement, showed that mandating ADR in would be significantly more effective than voluntary measures in ensuring access to affordable redress. Government is looking at making participation mandatory in the motor vehicles sector (to include the supply of new and used vehicles and servicing and repair) and in the home improvements market (such as roofing, glazing, plumbing work, or the fitting of flooring, kitchens, or bathrooms).”

“Government is considering requiring businesses in these sectors to pay for ADR on a pay per use basis but recognises that some businesses might find it more cost effective to pay an ADR provider on a subscription basis.”

“The UK has an established regime for addressing collective consumer harm and enabling consumers to gain collective redress when consumer law has been broken. This covers both public collective redress procedures, whereby regulators and the CMA can seek redress on behalf of consumers. Enforcers, such as the CMA, seek compliance with consumer law rather than taking representative legal action on behalf of consumers. The Consumer Rights Act 2015 strengthened routes for public enforcers to seek collective redress and government forsees the changes to make it easier and quicker for bodies to obtain redress on behalf of consumers.”

“Government is considering a range of options that will incentivise compliance and encourage businesses to use ADR. It is also looking at options that will disadvantage businesses that refuse to engage in an ADR process if the consumer eventually needs to take them to court.”

Helen Dewdney The Complaining Cow responses to the consultation Download

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Civil Aviation Authority consults on dispute resolution

Consultation means listening and reacting – but have they done that?

When consumers have a problem getting a refund from an airline they can go to an Alternative Dispute Resolution (ADR) provider, who will decide whether the consumer or the airline is right in a dispute. The decision is binding on the airline. The current system is not working well and is under fire from a number of consumer champions/organisations to improve.

Consultation takes off

On 17 July 2020 The Civil Aviation Authority (CAA) launched a consultation on ADR which closed on 25 September 2020. The ADR process is meant to ensure that passengers have a place to go to arbitrate in cases where the airline and consumer are in dispute. In October consumer champion Helen Dewdney revealed that the CAA had not informed any stakeholders such as the Ombudsman Association for which all Ombudsmen are members nor other consumer rights bodies. When this was brought to the CAA’s attention it extended the deadline although it still did not inform stakeholders despite saying that stakeholders had not received the original consultation due to an IT error. [1]

The findings report was published [2] on 18 February 2021 and the responses were published in full on 4 March 2021.Aeroplane in sky with clouds

Does CAA favour the airlines?

The CAA was criticised for not consulting with consumers but it attempted to justify this decision saying that “The CAA does not consider that pausing the process to issue a public consultation is proportionate in the circumstances or will achieve the speedier outcomes for consumers that the ADR scheme is intended to achieve.” And yet it consulted solely with the airlines, which is clearly biased

It would appear that the CAA has in fact completely ignored all consumer voices. There were 13 responses and 8 were published in full: A response from one of the two ADR providers, one airline, 4 consumer champion individuals/organisations, the Ombudsman Association and the Rail Ombudsman, which operates the only current Ombudsman scheme in travel (Rail). All the consumer champions, including Which? and the Northern Ireland Consumer Council, called for there to be a single ombudsman.

Call for a single ombudsman

The CAA has consistently refused consider a single Ombudsman, despite concerns being raised by Which? [3]  the Ombudsman Association and in the Ombudsman Omnishambles and More Ombudsman Omnishambles reports. [4]

For example, in its response to the consultation, The Consumer Council Consumer Panel said:

“Although placed on the Citizen Space of the CAA website, it has clearly not been drafted or presented with citizens or consumers in mind. There is little excuse for this. The substantive proposals have been under consideration by the CAA for nearly a year. This is nevertheless a public consultation and the CAA should be and be seen to be, consulting everyone: ADR schemes, airlines and airports, consumers, consumer organisations, and other stakeholders such as claims management companies and specialist lawyers and legal firms.

Charging a fee – adding insult to injury?

ADR entities are allowed to charge consumers a fee (£25), returnable if the consumer wins the case. This has been criticised, as it acts as a barrier and could put consumers off using the service. In its response the CAA said:

“The CAA acknowledges that there is an ‘in principle’ argument that ADR should be free to the consumer at all times. In traditional regulated sectors, such as financial services, energy, etc, where participation in ADR is mandatory for businesses, it is more straightforward to implement ADR in a way which is free to consumers at the point of use.”

However, this is NOT the case. Other voluntary schemes, such as The Motor Ombudsman and Dispute Resolution Ombudsman, are voluntary schemes and do not charge.

This position from the CAA is one that you would expect from a trade association, not a regulator! They know it’s best practice but are clearly not going to do it!

Calls for a single Ombudsman in aviation

There have been calls from various stakeholders over many years for a single mandatory Ombudsman in Aviation. The CAA has stated that it feels that the ADR regulations prevent them from making ADR mandatory, or approving a single provider, and that neither can be achieved without legislation. Whilst legislation to appoint a single Ombudsman would be welcomed, it hasn’t stopped Ofgem adopting a policy position to only approve one provider, or prevented single mandatory ombudsman schemes being established in both the rail sector and the new homes sector in the absence of legislation.

A spokesperson for the Ombudsman Association said:

“Whilst we welcome the CAA’s stated desire to strengthen the current system of redress in the aviation sector, the small alterations they have proposed do not go far enough to meet the needs of aviation customers, as the OA and other organisations highlighted in response to their consultation. It is clearer than ever that a single mandatory ombudsman is required to provide effective redress in the aviation sector and to help drive the improvements that the CAA are trying to achieve. We will continue to engage with Government and other stakeholders on the need for a single mandatory ombudsman in the aviation sector.”

The rail Ombudsman comments

Kevin Grix is the Chief Ombudsman of The Dispute Resolution Ombudsman, which runs the Rail Ombudsman, operating now for nearly three years. He offered to share the experience of working with the Department for Transport, stakeholders, the regulatory body and members to set up a new scheme with the CAA. The Chief Ombudsman is the longest serving in the country and led on the creation of this new scheme. His preference is for a collaborative approach, eliciting buy in from companies and from consumers/consumer champions.

Grix says “It is no coincidence that regulated sectors in this country favour the Ombudsman model, not only because of the extra layers of protection that they provide – but also because of their now proven track record of helping industry to improve and raise standards. There seems little merit to me in resisting this model.

Consumer campaigners call for change

The Ombudsman Omnishambles report  and More Ombudsman Omnishambles both called for a single mandatory ombudsman per sector. The latter report in particular evidenced the higher standards required of an Ombudsman than any other ADR provider and called for the approval bodies to action this.

Which? was critical of the consultation too. It called for a more ambitious approach that included establishing single statutory mandatory ombudsman.

Citizen’s Advice has already called for mandatory membership of an ADR scheme for airlines in its April 2017 report Confusion, gaps, and overlaps. [5]

Independent review flawed

The consultation report states that in 2020 the CAA commissioned Verita to carry out an independent audit of the two CAA-approved ADR bodies for assurance as to the quality and consistency of decision making and to determine the extent to which these decisions are transparent.

However, Verita was a peculiar choice, given that is has no experience in undertaking research in the consumer arena. [6] The company undertook no research whatsoever with consumers, airlines or consumer organisations. It literally only looked at information given by the ADR providers! This approach is obviously flawed.

Helen Dewdney, The Complaining Cow, believes that the consultation was a complete whitewash:

“It is quite clear that the CAA restricted who was able to respond and then completely ignored anyone who spoke on behalf of consumers. The CAA should be impartial and not favouring airlines. There appears to no reason why there should not be a single Ombudsman for airlines. A single mandatory Ombudsman would reduce confusion and provide higher standards for all stakeholders, including businesses and consumers.”

References

[1] CAA launches consultation and tells no-one…

[2] CAP2104: Amendments to the CAA’s policy for ADR applicants and approved ADR entities (CAP1324) CAA Decision

[3] Which? related articles

https://www.which.co.uk/news/2020/10/more-airline-passenger-misery-as-court-cases-could-take-years/

https://www.which.co.uk/news/2019/10/easyjet-passengers-lose-out-in-compensation-merry-go-round/

https://www.which.co.uk/news/2019/10/hundreds-of-ryanair-complaints-rejected/

https://www.which.co.uk/news/2018/05/passengers-still-having-to-fight-for-flight-delay-compensation/

Which? press release where it called for a travel ombudsman:

https://press.which.co.uk/whichpressreleases/which-calls-for-overhaul-of-broken-airline-complaints-system-to-restore-damaged-trust-in-the-travel-industry/

[4] Ombudsman Omnishambles:  Serious unresolved issues affecting the operation of the ombudsman ADR system in the UK  and More Ombudsman Omnishambles: The UK ADR landscape 20 months on…

[5] CAB 2017 report Confusion, gaps, and overlaps.

[6] Independent expert audit of CAP 2104 Amendments to the CAA’s policy for ADR applicants and approved ADR entities – CAA Decision February 2021

The CAA consultation response CAP2104: Amendments to the CAA’s policy for ADR applicants and approved ADR entities (CAP1324) CAA Decision

The 8 responses published in full CAP2116: Responses to CAA Consultation on Policy for ADR applicants and approved ADR entities, CAP1324