Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC

Alternative Dispute Resolution (ADR), through an ombudsman scheme or other independent complaint handling mechanism, is the process of settling disputes outside of the courts. Whilst defined as alternative, ADR is rapidly becoming the primary route for consumers to have matters of dispute resolved. In many UK business sectors, ADR schemes have been established for many years. TPO itself is approaching its 25th birthday and, along with other established schemes such as the Financial Ombudsman, is widely accepted as a quicker, efficient and sometimes more  knowledgeable route to ensuring businesses and consumers receive fair and credible outcomes.

However, there are many sectors in the UK where Ombudsman or alternative schemes are not available, a few of which have been identified as carrying a potentially significant consumer detriment.

FILLING THE GAPS

It is understood that where consumer confidence is low, businesses suffer, thus following the recent recession, restoring confidence became a priority for governments across Europe. Accordingly, the EU set about considering how it could assist in restoring consumer confidence and get markets working again. This resulted in a number of EU Directives, several of which are at the late stage of UK Government consideration and will soon be implemented. The Consumer Rights Bill (currently being considered in Parliament at the time of writing) is perhaps the most prominent piece of legislation in this regard. However the ADR Directive is also in the final stages of being considered by the Department of Business, Innovation and Skills, ahead of its implementation in the UK on 9th July 2015. In short, the ADR Directive aims to fill existing gaps between ADR jurisdictions and ensure that ADR is available across all sectors providing goods and services. In other words, whether you are buying a house or a pint of milk, the ADR Directive seeks to ensure that consumers can have access to an independent ADR provider to resolve any disputes.

The ADR Directive aims to fill in gaps and ADR will now be a formally recognised part of the justice system.”

In the UK the Government intend to achieve this by procuring a ‘residual’ ADR scheme to cover all of the sectors falling outside of the existing ADR schemes’ jurisdictions, with an initial remit of tackling a small number of sectors with a relatively high volume of complaints – namely the home improvement, second hand car sales and car repair and servicing sectors. Existing ADR schemes, such as TPO, will not be affected by the legislation but will be required to show they adhere to strict criteria to gain approval and accreditation under the Directive. A TPO audit has shown that the scheme already meets and, indeed, exceeds the criteria.

THE IMPACT

The impact of the ADR Directive will change the process of how goods and service disputes are resolved. ADR will now be a formally recognised part of the justice system and consumer knowledge of ADR should increase significantly. Consumers will be encouraged to look for businesses with recognised ADR certification, with the effect of reducing legal costs and the associated burden on the court system. By January 2016, ADR will extend to online cross border cases when the European Commission rolls out its online dispute resolution system which will be accessible to all consumers and businesses in the EU. This will provide consumers who purchase products and services from foreign businesses a platform to raise and resolve disputes.

Most agents follow TPO Codes, showing that the industry is not afraid to lead where others follow.”

Of course, where there is change there is always a potential downside. As all estate agents and letting agents in England know, being registered with a redress (ADR) scheme is a mandatory requirement of being able to trade. This will remain the case following 9 July 2015, however, for sectors where there is no mandatory requirement for redress, it will be the businesses decision, not the consumers’, whether to refer a dispute to any scheme established by a particular industry sector or the ‘residual’ ADR scheme. In other words, unless it is compulsory for product and service providers (as it is for estate, letting and management agents), businesses will not be required to register with an ADR scheme but they must advise consumers accordingly prior to the transaction occurring.

PROPERTY LEADS THE WAY

The Government is relying on the theory that businesses will voluntarily use the ‘residual’ scheme as a way of resolving disputes quickly and maintaining consumer confidence, thus protecting and enhancing their reputation over those businesses that choose not to. That over 60 per cent of UK letting agents and 75 per cent of estate agents voluntarily signed up to TPO prior to registration being mandatory, underlines the property industry’s understanding of the reputational benefits a good ADR scheme can bring to businesses operating in a competitive environment, displaying itself as forward thinking in that regard.

The ADR Directive will not require agents having to negotiate yet another tranche of legislation or make any changes to their current business practice. However, it will underline where the sector is compared to its peers. Indeed, mandatory redress aside, setting the sector above its peers are TPO’s Codes of Practice and its long property specific dispute resolution experience. There is no requirement within the ADR Directive for businesses to follow a code, yet the fact that the majority of the agency sector follow TPO’s Codes and that these are independently accredited by Trading Standards (the body tasked with overseeing the running of the UK’s ADR schemes following 9 July 2015) shows that the industry takes its reputation seriously and is not afraid to lead where others follow.