Consumer Advocate will get class action-style powers, says Government

The Government announced in July this year that it would appoint a Consumer Advocate next year.

"The Advocate would act as a champion for all consumers, improving consumer advice and education and having the power, as a last resort, to take action against traders who have treated consumers unfairly by breaching consumer protection law," said a Government consultation on the Advocate's proposed powers.

"Many consumers are very reluctant to initiate court action themselves, so the [Government's] White Paper proposed that the Consumer Advocate would also be given the power, as a last resort, to take cases on behalf of groups of consumers through the courts to achieve compensation," it said.

The Government said in its consultation that the Consumer Advocate's initial role will be informal, alerting consumers to scams and complaints and urging companies to treat consumers properly.

It will, though, give the Consumer Advocate formal legal powers to take court action against companies on behalf of groups of companies. The Government has passed legislation that can allow regulators to take cases on behalf of a number of people who have faced the same issue.

"This is a more efficient way of managing multiple claims with similar or the same issues of fact or law. At present in Scotland there are only informal mechanisms to handle multi-party claims," said the consultation. "In England and Wales a formal mechanism exists for managing multi-party claims: Group Litigation Orders. The problem with these mechanisms is that they require individuals to launch their own court action before the cases are managed together. Research suggests that many consumers find court action too expensive in terms of money, time and anxiety."

The consultation proposes definitions of the term 'consumer' and defines the circumstances in which the Consumer Action can take collective court cases. It also deals with the details of what kinds of business activity should be covered by the Consumer Advocate's powers.

It proposes that financial services transactions not be covered by the Consumer Advocate's new powers. It says that because the Government has already planned to create a right to take collective action, via the Financial Services Bill, that area of business should be excluded "in order to provide certainty for business as to whether they could be liable to a collective action claim under the power in the Financial Services Bill or by the Consumer Advocate".

The consultation also proposed that participants in an action by the Consumer Advocate would have to opt in to the case, but could only do so before damages in the case were quantified.

"We believe that the 'pre-damages opt-in' model will deliver the maximum benefit to consumers without the difficulties associated with assessing and dealing with damages when consumers have not been identified," it said.