THE CONSUMER CODES APPROVAL SCHEME (CCAS)

6.8 CTSI set up the Consumer Codes Approval Board (CCAB) to govern and run the scheme. The organisation is keen to approve new codes, and aims to complete approvals within 12 to 18 months.

6.9 To obtain approval, a consumer code must be sponsored by a trade body which takes responsibility for writing its own code. CTSI is the accreditation body which sets overall standards, has oversight for all approved codes and provides quality assurance. Unlike the OFT scheme, code sponsors fund the programme through an approval fee and continuing membership fees.

Number of schemes

6.10 Most OFT codes moved across to the CTSI programme: 11 out of the 12 schemes approved by the OFT did so. The exception was the Direct Selling Association, who considered “that the costs [of code membership] outweighed the benefits”.³

2 Department for Business, Innovation and Skills, Empowering and protecting consumers:

consultation on institutional changes for provision of consumer information, advice, education, advocacy and enforcement (June 2011),

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31394/11-970-empowering-protecting-consumers-consultation-on-institutional-changes.pdf.

3 Direct Selling Association, Annual General Meeting 2013 Booklet,

http://www.dsa.org.uk/_webedit/uploaded-files/All%20Files/DSA%20-%202013%20AGM%20Booklet.pdf.

6.11 As of June 2015, there were 14 CCAS codes, to which over 27,000 member businesses have signed up voluntarily. In addition to the 11 which transferred from the OFT programme, three new codes have been approved: for the home warranty provider, Checkmate; a motor code covering Vehicle Warranty Products; and a second code for the Property Ombudsman concerning residential lettings.

6.12 The codes cover a wide range of sectors, including carpet sales, removal services, renewable energy (such as solar panels), will writers and paid-for debt collection. There are also twelve prospective codes at various points in the approval process.

Core criteria

6.13 Although the content of these codes varies greatly, accreditation by CTSI requires core criteria to be satisfied. These include (our emphasis):

(1) Addressing undesirable trade practices arising within the sector;

(2) An obligation to market and advertise clearly and truthfully;

(3) Provision of clear pre-contractual information and terms and conditions;

(4) A prohibition of high-pressure selling;

(5) Cancellation rights, guarantees and warranties;

(6) Protection of deposits or prepayments;

(7) A complaints handling mechanism; and (8) Monitoring and enforcement criteria.

Approval

6.14 The approval process consists of two stages:

(1) Stage one approval: the code sponsor must meet the core code criteria established by CTSI and the sponsor’s members must agree to abide by the code.

(2) Stage two approval: evidence must be provided to CTSI to demonstrate the code is working well in practice.

6.15 This second stage aims to ensure that outcomes, and not just promises, are accredited. When CTSI is satisfied, permission will be granted to the code sponsors and its members to use this “Approved Code” logo:

6.16 We have not been able to locate empirical data on whether consumers recognise and understand this logo.⁴

The CTSI approach to prepayment protection

6.17 The CTSI consulted on the core code criteria in October 2012 before taking over the Consumer Code Approval Scheme in April 2013. While it did not propose to remove the requirement for prepayment protection, it did propose to accept a wider range of evidence in support of this:⁵

It is proposed that a more pragmatic approach is taken when addressing the issue of deposit or prepayment protection, and a wider range of evidence be acceptable from code sponsors on how they meet the requirements of this criterion, taking into account sector-wide trade practices and risks. For example, it is recognised that tying up working capital can be an issue for some businesses, and may not be appropriate for all trade sectors. One option may be to limit upfront deposits to a maximum percentage of the value of the goods or services.

6.18 CTSI adopted a risk-based approach: it does not insist on deposit and prepayment protection for code members where deposits or prepayments are typically low value (less than £50), or where there is a short time between payment and delivery (less than two weeks).

6.19 CTSI recognises, however, that protection should remain robust where deposits are higher-risk (such as larger deposits or for a longer period of time). CTSI allows this to be provided for in a variety of ways, including trust accounts, insurance-backed schemes, bonds, or mutual aid cover.

4 CTSI has told us that a small sample size YouGov survey has been conducted to establish a baseline of consumer awareness. This information will be used to target consumers through marketing and PR campaigns.

5 Chartered Trading Standards Institute, Consumer Codes Approval Scheme: New codes approval criteria - consultation paper (October 2012); Consumer Codes Approval Scheme:

New codes approval criteria - Response to the consultation exercise (February 2013), http://www.tradingstandards.gov.uk/templates/asset-relay.cfm?frmAssetFileID=28140.

Prepayment protection in CTSI codes

6.20 In Appendix C, we summarise the prepayment protection provided by CTSI codes. Several codes do not specify the form that such protection must take.

Instead they allow individual members to choose one of several methods. For example, the Institute of Professional Willwriters requires members who take deposits to show they are using “one of five approved methods of pre-payment protection, such as a client account or participation in the Institute’s payment protection scheme”.⁶

6.21 Where a method is specified, the most common is a requirement to hold client monies in a ring-fenced trust account. However, this may not be an easy option for businesses. It requires additional administration on a day-to-day basis, results in upfront legal costs and deprives the business of working capital. As we discuss in Chapter 2, there is also a risk that trusts will be challenged by administrators and liquidators, and so fail to provide protection.

6.22 A few CTSI codes offer insurance schemes. For example, the Renewable Energy Assurance Scheme (REAL) extended the insurance arrangements it had previously used for warranties to cover deposits as well. From February 2012, the Deposit and Workmanship Warranty Insurance (DAWWI) scheme is one option available to members of the scheme who take deposits.

6.23 Some consumer codes provide for “mutual assistance”. The British Association of Removers (BAR) is an example. If a member goes out of business or otherwise does not complete the service, the trade association will enlist another member business to complete the contract. BAR pointed out to us that this was usually the consumer’s priority. BAR also undertakes that, if the business cancels less than 10 days before the agreed removal date, and it cannot find another member to complete the service, it will refund 150% of monies paid. Refunding more than they originally paid aims to reassure customers that they are “completely protected”.

6.24 Another code sponsor, the Carpet Foundation, undertakes to fulfil orders if the consumer has paid a deposit of up to 50% of the order value.⁷ This relies on the consumer paying the Carpet Foundation or the new supplier the balance of the price. The British Healthcare Trades Association runs a similar scheme, but will only absorb deposits of up to 15% of the retail price. Such order fulfilment schemes can be effective, but they rely on traders keeping deposits relatively small. This does not always happen: a failure to adhere to the maximum deposits level agreed with CTSI resulted in the Carpet Foundation being advised it was not meeting the core criteria.

6 Chartered Trading Standards Institute, Institute of Professional Willwriters Audit 2014, p 5, http://www.tradingstandards.gov.uk/templates/asset-relay.cfm?frmAssetFileID=75379.

7 Carpet Foundation, Consumer Code of Practice for use by “retail member” retailers, para I(3), http://www.carpetfoundation.com/wp-content/uploads/code-of-practice-updated-29.07.14-Final-Version.pdf.

Sectors not covered

6.25 Unfortunately, the current CTSI codes leave many sectors uncovered, including the furniture and glazing sectors.⁸ Furthermore, the Motor Codes (New Cars) scheme applies only to the manufacturer or other warranty provider, and not the dealer. There is currently no scheme protecting deposits paid to car dealers who become insolvent.