Consumer Redress - An Overview
Sir Gordon Borrie*

A society in which responsible consumers can be sure they deal only with
responsible traders is an ideal which is never likely to be fully attained. There are
many ways in which those of us charged with protecting the legitimate interests of
consumers strive towards this ideal: by promoting legislation, by educating the
public, by seeking to influence problem traders, and by prosecuting and taking
other enforcement action against those who persistently cause trouble. But it is
surely also desirable that worka'ole redress schemes are available for consumers
themselves to use when direct contact with the trader fails to resolve their
problem. Such facilities are one of the elements which go to make up a healthy
marketplace where responsible traders can flourish, and the irresponsible can be
penalised and deterred.

The potential demand for redress is very great. A survey commissioned by the
Office of Fair Trading in November 1990showed that, in the previous 12months,
over 40 per cent of the adult population had had some cause for complaint about
goods or services, some of them about more than one item. This means that each
year millions of people have millions of causes for complaint. Earlier research 1
suggests that about two thirds pursue their complaints and around half of these are
not satisfied with the outcome. I am certainly not suggesting that all unresolved
problems are awaiting some form of dispute resolution. Nevertheless, it is perhaps
worth reminding ourselves of some of the available figures on the use of consumer
redress schemes. It has been said that fewer than 12,500 consumer disputes are
handled each year by the small claims procedure of the county courts.2 Only 1,915
complaints were completed in 1990 by the Insurance Ombudsman.3 Only fifteen
hundred complaints were handled by the conciliation section of the Retail Motor
Industry Federation, and just 42 cases were decided under its arbitration scheme.
Indeed some of the arbitration schemes offered by consumer codes of practice

* Q.C., Director General of Fair Trading. This paper is based on a speech delivered at the Office of Fair
Trading Conference on Consumer Redress, London, 30 January 1991.
1. Su=aries of this research are available from the Office of Fair Trading.
2. Ordinary Jusrice. Legal Services and EheCourts in England and Wales: a Consumer View, National
Consumer Council (1989), p. 287.
3. Annual ReporE of the Insurance Ombudsman 1990, p. 24.

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which I have endorsed have never been used. The Office of Fair Trading's survey
found that very few people sought advice of any kind. Fewer still used one of the
existing redress schemes: over the preceding five years only six per cent of the
sample had done so.

If we accept that there will always be a need for consumer redress schemes we
must also ask ourselves: what form should they take? And are there today too many
disparate schemes? In an interview I gave in 1978 I said:

"What I feel is that many flowers should bloom in the field of suitable small
claims machinery, because there probably is no one ideal way."4

The flowers have certainly bloomed.
First there is the county court system, and in particular the small claims

procedure availablefor claims up to £500 and, from 1July 1991,up to £1,000. The
purpose of the procedure is to provide an accessible, quick, cheap and informal
means of deciding claims which involve comparatively small sums of money. The
Review Body on Civil Justice commissioned research into people - consumers and
traders - who had used the small claims procedure. In its 1988report it concluded
that for most people the litigation process was likely to be seen as complex, strange
and unpredictable.s However, the procedure emerged as substantially sound in
that it was able to produce results, without major delay and cost, which satisfied a
large number of those who used it. Moreover it was workable, in that it produced
these results by a process which many litigants were able to operate without undue
difficulty. But litigants could be prejudiced by a lack of uniform procedure and by
considerable inconsistencies of approach around the country. County Court
Registrars - or District Judges, as they are now called - may adopt very different
approaches in how they handle small claims cases.

The Courts are for the use of everyone with a civil claim of any kind. But over
the years various forms of alternative dispute resolution have come into being,
either to remedy some of the perceived drawbacks of court action or to provide a
redress procedure tailor-made for a particular sector and often benefiting from the
specialist knowledge of those administering it. The first of these is arbitration. I
have always encouraged the use of arbitration in claims that private consumers
have in respect of breach of contract and other civil disputes. Nearly all the codes
of practice drawn up in consultation with the Office of Fair Trading allow
consumers the choice of having their disputes settled by arbitration. I have had
two reasons for encouraging arbitration as an alternative to the courts. One is that,
despite the evidence that consumers acting as unrepresented litigants are generally

4. Law Soc. Gazette, 28 June 1978.
5. Report of the Civil Justice Review Body (L.C.D., 1988). Fuller materials are to be found in the
Consultation Paper on Small Claims and the Touche Ross Factual Study of Small Claims Cases (L.C.D.,
1986).

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CONSUMER REDRESS - AN OVERVIEW

well served by the courts, the courts are insufficiently used. Part of the blame for
this must lie with the fact that the county court - far from being the little man's
court - is the place where the little man gets taken to court. Statistically, he or she is
more likely to be sued there than to do the suing, and this can be expected to
influence public attitudes and expectations of the procedure. My second reason is
that because of the inherent flexibility of arbitration it has been possible to adapt it
so that it suits the needs of some consumers better than the court procedure does.
Arbitration under codes of practice recognised by the Office of Fair Trading is
usually based on documentary evidence alone, which removes the need for
personal attendance and can help speed up the decision and save costs. Moreover
in some cases it has not just been an alternative procedure. For people wishing to
make a claim over the installation of double glazing or a moderately expensive
family holiday, for example, it has been the only procedure that was practical
because of the low limit for the small claims scheme in the courts.

I am aware that arbitration under industry codes of practice has its critics. In
December 1990, the Office of Fair Trading commissioned some discussion
groups.6 Those taking part in the discussions were people who had pursued a
complaint beyond the first stage of going back to the retailer or the supplier of a
service. The discussions showed that there was very little awareness of arbitration
amongst consumers and some felt that the trader would only suggest it if he was
likely to win. Sadly, and I am sure, wrongly, there was very little expectation of
impartiality .

One feature of the code of practice schemes is that consumers must first submit
their complaint for conciliation by the relevant trade association. Trade
associations are set up principally to protect the interests of the trade. It is not
surprising that very few members of the public believe they will deal
sympathetically with a consumer. An arbitrator is of course completely
independent of the trader, but it is evident that this fact is not widely understood.
Public awareness - or otherwise - of the complaints procedure must also be a
factor. I am sure that one reason why the arbitration scheme ofthe Association of
British Travel Agents is well used is that it is described in every ABT A tour
operator's brochure. Information is not so readily available to members of the
public dealing with other kinds of business, and often the redress procedures are
available but no one makes use of them.

The third flower to bloom is the institution of the ombudsman. The first
ombudsman, appointed in 1967, was the Parliamentary Commissioner for
Administration (commonly called the Parliamentary Ombudsman), who considers
complaints, filtered through Members of Parliament, that a Government
department has caused injustice as a result of maladministration. The same
individual acts as the Health Services Ombudsman. Later, Local Government
Ombudsmen were appointed, with more limited powers. These ombudsmen

6. A summary of the findings of the discussion groups is available from the Office of Fair Trading.

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seemed to meet a real demand from the public. In 1981 the insurance industry
created an ombudsman scheme which can be used by private consumers in their
relations with insurance companies who subscribe to the scheme. The banks took a
similar initiative in 1986. In the same year the Building Societies Act required the
setting up of an ombudsman to deal with complaints against all building societies.
In 1990 a corporate estate agents ombudsman scheme was established by fifteen of
the largest chains in the industry. Two more statutory ombudsmen were also
created. The Lord Chancellor appointed a Legal Services Ombudsman to
consider the handling of complaints by the Bar, the Law Society and any other
legal professional body. And the Secretary of State for Social Security appointed a
Pensions Ombudsman, who will investigate complaints of maladministration, or
disputes of fact or law, brought by individuals against the trustees or managers of a
personal or occupational pension scheme. Every national newspaper seems to have
an ombudsman now, and I am aware that some have already upheld complaints by
readers against the newspaper which appointed them. There is even a timeshare
company which has appointed a panel of ombudsmen - not before time, some may
think! Indeed, the Independent ran a cartoon showing serried ranks of businessmen
being addressed by a man wielding a megaphone. The caption read "Hands up,
please, anybody who isn't an ombudsman."7

I have always thought it a major plus point for the ombudsmen that they publish
annual reports. These are well reported in the Press and they contain many useful
observations on how the industry should be conducting itself. The discussion
groups of consumers commissioned by the Office of Fair Trading were
particularly interesting on the subject of ombudsmen. 'The ombudsman' - and in
the popular imagination there is evidently only one - is thought of as a well-
respected and impartial person. But he is also a remote, mysterious figure. People
were uncertain who he was, what he did, or how they could find him. There are
other signs that all may not be well. The first Unit Trust Ombudsman resigned
after five months. The second found that his scheme crumbled away beneath him.
Moreover the term 'ombudsman' is being applied to people operating very
different kinds of scheme with different rules. As ombudsmen proliferate, and
more people make use of them, consumers' experience of one scheme will be likely
to influence their expectations from the others. But they may be misled. For
example, building societies may, in certain circumstances, refuse to comply with a
decision by their ombudsman. This could come as a shock to someone used to the
binding nature of decisions by one of the other ombudsmen.

Ombudsmen are sometimes criticised when their decisions favour the company
rather than the consumer. One example of this is the disputes over so-called
'phantom' withdrawals from automated teller machines. These are the most
common type of complaint dealt with under both the Banking and the Building
Societies schemes, and complainants have been particularly frustrated that the

7. The Independent" 23 June 1990.

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ombudsmen have rarely found in their favour in these cases. Often further
investigation has shown that the withdrawal was all too real, and was made by a
relative or friend of the cardholder without his or her knowledge. Both
ombudsmen have been at pains to explain in their annual reports that in these
circumstances the cardholder is liable and that they cannot undo the legal effect of
the contract between the cardholder and the bank or building society. Criticism of
an ombudsman's decision often arises from an expectation, perhaps fostered by
the media, that an ombudsman is a consumer champion and must always give
consumers the benefit of the doubt. This makes it especially interesting that the
decisions of the second Insurance Ombudsman, Dr Julian Farrand, have been
more favourable to consumers than those of the first, although both Insurance
Ombudsmen operated within the same scheme. Dr Farrand's more interventionist
stance has led to mutterings of protest from the insurance industry. These made
the New Law Journal comment that there appeared to be "a basic, although
probably widespread, misunderstanding of the purpose of such operations on the
part of the practitioners who provide them. Ombudspersons, they seem to believe,
are a jolly good thing to have when telling the public how well they will protect
their interests but tum into a major-league nuisance when they actually start doing
SO."8

Recently we have seen a new blossom of a different sort, the regulators of the
public utilities which have been privatised. So far there are four of them, dealing
with Telecommunications, Gas, Water and Electricity. Dispute resolution is of
course not their primary function, but they do have a statutory duty to protect the
interests of the customers of the utility or utilities which they regulate and they
also have powers of enforcement. Different legislation has prescribed different
procedures for handling consumers' complaints. The Director General of
Electricity Supply and his regional offices can only deal with complaints about the
generation, transmission, distribution and supply of electricity. The regional
offices are supported by local Consumers' Committees which are concerned with
the distribution and supply of electricity. Neither can deal with complaints about
such activities as the supply and installation of appliances by the electricity
companies. Customers of British Gas, on the other hand, can seek help from a
statutory body with complaints about all its activities. As a general rule, the
Director General of Gas Supply deals with disputes up to and including the gas
meter. The Gas Consumers Council, which does not have enforcement powers,
can deal with disputes arising on the other side of the meter - for example, the
retailing, installation and servicing of appliances by British Gas and, as the figures
in the conference pack show, these are a healthy proportion of all the complaints
and enquiries which it considers. The Director General of Telecommunications
takes the lead on complaints about the suppliers of telecommunication services,
although he works closely with four national advisory committees. But the

8. N.L.J., 18 May 1990.

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Director General of Water Services has established regional Customer Service
Committees which handle the majority of complaints from water consumers; only
a few, including alleged breaches of the water company's licence, are dealt with by
the Director General. I do not have a view on which of these ways of handling
disputes against public utilities is the best. Perhaps each separate industry really
does require a separate procedure.

The latest flower in the field of dispute resolution is mediation. Like arbitration
this was originally a means for resolving disputes between businesses but - again
like arbitration - it is a flexible procedure and it could be adapted for dealing with
consumer disputes. Mediation is an attempt to resolve a dispute in a way which
satisfies both parties. A mediator will hold meetings with both sides, together and
separately, in an effort to reach an agreement. Mediators may propose solutions,
but they cannot impose them. The system is essentially conciliation conducted not
by a trade association but by an independent third party, and it satisfies the desire
expressed by many consumers to put their case in person. Moreover, it compresses
what can be a long drawn-out process into a single session. However, much
depends on the qualities of the mediator. It is also possible that the parties might
come to the end of the process without having reached an agreement, and would
probably then have to proceed to litigation. Finally there is the question of cost.
Mediators will need to show the same willingness that arbitrators have shown to
deal with consumer disputes at rates which consumers can afford.

Over the years, I have taken the view that it was healthy and desirable that a
variety of dispute settlement schemes should be available for consumer disputes.
However, one of the subjects that needs to be considered is whether it is in the
public interest that such a multiplicity of redress schemes as now exist should
continue indefinitely, and perhaps proliferate even more in future. Does a choice
of avenues for redress bring more problems than benefits for consumers? Should
the administrators of the schemes be learning more from each other about their
strengths or weaknesses? If so, how should they do this? Should there be an
established forum for consumer dispute resolution where those involved can
regularly meet and is there a need for more research? Another question to consider
is whether in the long term there should be a single consumer redress scheme, or at
least a single point of entry where everyone can lodge a dispute regardless of its
subject matter? Such a proposal would be a fairly radical innovation in the United
Kingdom, and the question of how to finance it would be a particularly tough nut

.to crack.
My aim is to have more consumers with a legitimate complaint against a trader

seeking redress, because that is their right and because effective redress
procedures act as a curb on the wilder excesses of problem traders. This will only
happen when consumers are presented with a scheme, or schemes, which they feel
confident about using.

In my experience, consumers gain more confidence if redress schemes give a
high priority to the following criteria.

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(i) Redress should be inexpensive. This does not necessarily mean it should be
free, but consumers should not be deterred from pursuing a complaint by
the amount of the application fee, or by the fear that they might incur more
expense if they lose. It is reasonable that if they win the trader should pay
their costs, as well as any compensation they may have been awarded. It is
not reasonable that if they lose their case they should also risk paying the
costs of the trader, who in many cases will have incurred the expense oflegal
advice.

(ii) Redress should take full account of consumer's lack of experience. For most
consumers this will be a once-in-a-lifetime battle. They are taking on
someone whom they perceive to be more powerful and who will in all
probability be more experienced at litigation, less troubled by delays, and
more likely to have the benefit of legal advice and representation. At the
most practical level, this means that litigants should be able to fill in
application forms unaided. Information should be written in plain English,
preferably with versions available in the languages spoken by the main
ethnic minorities in this country. Officials - whether in the county courts,
trade associations or in an ombudsman's office - should be trained to advise
consumers on how best to present their case, so that the less literate or less
confident do not suffer any disadvantage. But perhaps more fundamental
reforms are also needed. Consumers may assume that the arbitrator,
registrar, or ombudsman is more likely to sympathise with the trader,
especially if the trader is responding to letters through a lawyer, because they
all seem to corne from the same social class or educational background or
know one another. Is there a need for a forum specifically designed to be
used by consumers? This is the kind of service which the Manchester
Arbitration Scheme and the London Small Claims Court provided in the
1970s.They broke new ground by attempting to combine oral hearings with
fast, cheap, informal and interventionist procedures. It can be intimidating -
even for the most confident of consumers - to pursue a dispute, on a
'do-it-yourself basis, through a court which is largely accustomed to dealing
with professional representatives. Is it right that traders can be legally
represented at a hearing when consumers are not? How should District
Judges adapt to the new right of consumers to be accompanied by a lay
helper such as a Trading Standards Officer or a Citizens Advice Bureau
worker, or even a friend or neighbour? And, most importantly, how can
District Judges arbitrating on small claims be encouraged to be more
interventionist?

(iii) Redress should be the consumer's own choice. First, consumers should be able
to choose which redress scheme to use, and there should be no attempt to
force them to use one scheme rather than another. An agreement which
attempts to force arbitration on consumers is no longer enforceable,
following the enactment of the Consumer Arbitration Agreements Act 1988.

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But my officials still hear of cases where the trader tells consumers with
whom they are in dispute that arbitration is the next step, without first
directing them to an adviser who will provide information about the options
so that they can make this decision for themselves. Secondly, it is important
that no obstacle should be placed in the way of consumers who wish to use a
redress scheme. Some of the schemes offered by professional bodies allow
the member to refuse to be taken to arbitration. This is surely a case of giving
with one hand and taking away with the other.

(iv) Redress should be speedy. It can take six months or more for a complaint to be
dealt with by arbitration, through the small claims procedure of the courts or
under a code of practice. Consumers might be prepared to tolerate this wait
were it not that they first have to wait for the trader to respond to their initial
complaint and, where conciliation is involved, for a trade association to
attempt a settlement. The National Consumer Council found an average
delay, for conciliation and arbitration together, of 45 weeks for ABTA's
scheme and of 54 weeks for the scheme operated by the Glass and Glazing
Federation.9

(v) Redress should be enforceable. Redress schemes supported by a trade
association generally have a clear advantage here, because pressure to pay
awards will usually be placed on a delinquent trader by the association. It
can come as a shock to consumers who have won their case in court to find
that their battle is not necessarily over, and that they now have to enforce
their award.

(vi) Redress must be well-publicised. There is no point in having a redress scheme,
however good, if its existence is not known to the people it is created for. To
quote one person taking part in the discussion groups commissioned by the
Office of Fair Trading: "the main problem is finding out where they all are.
How do you go about finding them?" In my view traders belonging to a
trade association which offers a redress scheme should always give details of
the scheme to a dissatisfied complainant. I should also like to see an effective
publicity campaign announcing the increase in the upper claims limit for
small claims and other reforms to the county court procedures.

I have looked principally at the redress schemes which are there for consumers
to use, but I believe there must also be changes in the attitudes of consumers
themselves. I am concerned that so few members of the public are prepared to
press for their right to redress, and in particular that they are reluctant to use the
courts. Every day my Office receives letters and telephone calls from members of
the public asking me to intervene in what are essentially civil disputes, where I
have no powers to act. Quite often, it is apparent that they know they are entitled to

9. Our of Gourr: A consumer view of rhree low-cosr rrade arbirrarion schemes (National Consumer
Council, 1991), p. 25.

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go to court, or to use another means of redress, but that they do not think this is
feasible. What are the reasons for this? Do they think the courts are too expensive?
Or just too difficult? I don't know, but this view of the courts is certainly not
shared by all those who have used them. One person taking part in the discussion
groups which my Office commissioned said of the small claims procedure: "I was
shocked at how easy it was, I couldn't believe it." Somehow the courts, and all the
other consumer redress schemes, must get this message over to the public.

I raise these issues, not because I have an all-embracing solution to flourish - I
don't - but because I am concerned that consumers are being denied their basic

. rights, either through their own ignorance or reluctance to pursue complaints or
through the inadequacies of current redress procedures. Consumer protection
legislation can only be effective if the rights it provides are enforced and no amount
of civil (as opposed to criminal) legislation will succeed if consumers are unaware
of it, or unwilling or unable to use it. Greater publicity of existing rights and
avenues of redress will help, but we need further work on what consumers need
from redress schemes, whether that need is being met and what should be done to
improve matters in the future.

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