UK government announces reforms to consumer ADR services

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The UK government recently released a report announcing a wide range of far-reaching changes to UK competition and consumer protection regulatory regimes, following consultation last year.

The main reforms are discussed on our Competition Notes blog, here. Below we highlight a less important aspect of the report, concerning the role of ADR services in consumer markets.

Under the banner of “helping consumers to independently enforce their rights”, the report addresses the following issues.

  • Consumer awareness: The report acknowledges that the landscape of consumer ADR services is decentralized, complex and difficult to understand, with multiple regimes in some sectors and none in others. While noting that the responses to the consultation advocated the creation of a one-stop entry and signage window, the report does not announce any specific proposal in this regard. Rather, it will continue to work with relevant stakeholders “to help promote MARC and ensure ease of access.”
  • Company response times: The report notes that in regulated markets, most regulators have generally set an informal upper limit of eight weeks for companies to resolve complaints before consumers are allowed to bring a dispute to ADR. The consultation process indicated support for reducing the standard response time to four weeks, although some concerns were expressed that in some sectors this could prevent traders from properly investigating complaints and impose additional business charges. The government has decided not to impose a standardized response time of four weeks but will continue to explore the case for reducing the current informal upper limit while ensuring appropriate safeguards for complex cases.
  • Quality and supervision of ADR services: During the consultation, the government signaled its intention to improve the quality and consistency of consumer-facing ADR services, in order to increase business and consumer confidence in ADR. In a major announcement, the report confirms its intention to:
    • require that “all companies that offer dispute resolution services in consumer markets” be approved under the Alternative Dispute Resolution of Consumer Disputes (Competent Authorities and Information) Regulations 2015; and
    • strengthen the existing accreditation framework to ensure that a common set of standards is applied and that suppliers can be held accountable.

“Consumer ADR” is generally understood to refer to services provided by dispute resolution bodies created specifically to handle disputes between consumers and merchants, such as ombudspersons and trade association schemes. It is currently unclear to what extent the new approval requirement could extend to individual mediators/neutrals or small independent ADR organizations that do not operate in a particular consumer sector but are available to handle disputes. that could be classified as consumer disputes.

  • Improve business adoption of ADR in non-regulated markets: The consultation recognized that while in regulated consumer sectors it is generally mandatory for merchants to participate in ADR schemes, in sectors where participation is voluntary there is little commitment from businesses, particularly among SMEs. Although the report notes strong support for it in the responses to the consultation, the government does not appear to be following through on a proposal to make ADR participation by companies mandatory in the motor vehicle and home improvement sectors. The report’s conclusion regarding improving business engagement is limited to supporting the ongoing comprehensive review of Justice Department policy on the role of ADRs in civil litigation generally.
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