NCS Alternative Dispute Resolution for Consumers Implementing the Alternative Dispute Resolution Directive and Online Dispute Resolution Regulation. The NCS would like to thank the Department for Business, Innovation and Skills for the opportunity to respond to this consultation. The NCS response is supported by the Retail Motor Industry Federation ( RMI ) and the seven associations it holds whose members are entitled to use the NCS as a key feature of RMI membership. This consultation response is submitted by the National Conciliation Service ( NCS ) which specialises in motor retail conciliation. The NCS offer independent arbitration to customers and businesses throughout the automotive sector. Access to the services of the NCS is predominately granted through membership of motor industry trade bodies. All arbitrators appointed by the NCS are Fellows of the Chartered Institute of Arbitrators. The RMI is the UK's leading automotive trade body, representing over 8400 members consisting of; franchised car and commercial vehicle dealers, independent garages, bodyshops, motorcycle dealers, petrol retailers, auction houses and cherished number plate dealers, who provide sales and services to motorists and businesses across the UK. All members of the RMI have access to the services of the NCS through membership, as well as their customers. The NCS has responded to a number of the consultation questions, however those that are not relevant to our operations have been omitted from the below submission. Each of our responses has an automotive focus. Q1. Do you think there are any significant gaps in the provision of ADR in the UK? Please identify any sectors where you think the provision of ADR is insufficient. 1.1 The NCS feel that ADR schemes offered within the automotive industry are sufficient. However, there is a gap in the provision of ADR as not all automotive retail businesses have access to an ADR scheme as they are not members of a trade association or code scheme that offer these services. Consequently customers of these businesses will not have access to ADR. 1.2 ADR schemes within the automotive industry are provided by trade associations and code scheme providers. These include; the NCS, available to RMI members and other automotive schemes such as Bosch, the Vehicle Builders & Repairs Association ( VBRA ) and industry code provider, Motor Codes. ADR provisions for the motor industry is piecemeal creating gaps when businesses are not part of a Trade Association, Standard or Code of Conduct. The recourse for all other businesses and therefore their customers is the courts. 1.3 The NCS believe every effort must be made to ensure that those businesses not part of an ADR scheme are encouraged to use one. In regards to the motor industry, we feel that ADR must be used throughout the industry for the Directive to be effective. 1.4 Failings and gaps, as we have mentioned above, are evidenced by the number of calls received by the NCS which cannot be actioned as the business in question is not a member of the necessary trade association. For example, in 2013, 44 calls were dismissed as they involved garages/dealers outside of RMI membership or the NCS service.
1.5 Arguably, lack of education and awareness play a part in the deficiency of ADR. The onus is placed on businesses to inform their customers of its existence and if they do not, consumers are unaware of the ADR provision and consequently how it may be accessed. Furthermore, consumers often only have simple enquiries and require assurance rather than a full ADR process but are unaware of where to access information/of who to speak to with. Last year the NCS received 6,779 initial calls of contact, of those, only 494 new cases were opened; the experience of the NCS is that the majority of callers are simply looking for some guidance. Q2. Do you agree that the current provision of ADR in the UK is not enough to meet our obligation to have ADR available for all consumer disputes? If you disagree, can you advise which ADR schemes are suitable to handle all disputes, and whether there are limitations to the number of disputes or type of dispute that these schemes could handle? Would these schemes be able to process an increased volume of disputes within the 90 day deadline for concluding disputes set by the Directive? 2.1 The NCS agree that the current provision of ADR within the UK is not sufficient to meet Directive obligations. As stated within Q1, access to ADR is often limited to membership of an organisation or code scheme provider. As ADR is voluntary; this can be detrimental to consumers if businesses do not choose to engage in an ADR scheme. Every effort must be made to encourage membership of ADR to enable both consumer and business protection outside of the courts. 2.2 Schemes that currently operate a sufficient provision of ADR, or schemes that will easily meet the new criteria with slight changes, may have the potential to extend their services further, providing additional costs are attributed for. 2.3 However, as ADR providers, such as the NCS, currently fund ADR schemes through their own resources, such as trade association membership fees, schemes may not be willing to extend these services beyond membership unless a charging structure and also common standard of business practice is reached. Fees would need to be charged to non members and potentially subsidisations made to already established ADR schemes which need to expand to enable them to manage the increased volume of disputes. 2.4 The ability of established schemes to manage the increased number of cases, will be dependent on the sector, those sectors that are likely to receive a larger volume of complaints may be reluctant to open services beyond their current membership and as such, financial incentive/subsidisation will be imperative. 2.5 Furthermore, if a business is to use an ADR scheme provided by a Trade Association, there will be an expectation from consumers that the business meet the standards set by the association. It is therefore important for the reputation of trade associations and code operators that businesses using the ADR adhere and comply with the standards set by the trade body. Q3. Can we expect businesses not currently obliged to use an ADR scheme to refer complaints to a voluntary residual ADR scheme? What steps could Government and others take to encourage businesses to use a voluntary ADR scheme? 3.1 To encourage the use of voluntary ADR schemes, the NCS feel it is vital that schemes are sector specific; as businesses will have confidence that the operators understand the industry. Case handlers will understand common practices, standards that should be met and to what extent the onus should be placed on a business s conduct or whether there is a consumer misunderstanding. Whilst we appreciate that it practice it may be
more of a necessity for a case worker to have had experience in ADR rather than the specific area, we believe that businesses would not feel confident in case handlers lacking in expertise knowledge and resist the use of ADR. Q5. Is there a specific operating model that a residual ADR scheme should adopt (e.g. mirror existing ombudsman models)? Financial Ombudsman Service 5.1 One of the most established ADR service currently available is the Financial Ombudsman Service. Although this service does have operational issues (often relating to case worker expertise), the provider does operate a successful case fee system and separate levy scheme on firms authorised by the Financial Conduct Authority. This would be a useful operating model for a residual ADR scheme to imitate. Q6. Can you suggest what an appropriate maximum and minimum settlement value for a residual ADR scheme should be? How have you arrived at these figures? 6.1 The NCS feel setting a maximum limit for settlement value is inappropriate. The NCS do not currently implement a maximum limit and have not found this detrimental to the operation of the service or as an ADR provider. Any limitation would again, have to take into consideration, the different requirements of sectors, relating to the goods and services they provide and the financial value/expense of these. A residual ADR scheme will need to have the flexibility to handle a vast range of cases and the varying costs of these disputes. Adding maximum settlement values will limit a residual schemes ability to cater for the varying cases. 6.2 When assessing a minimum settlement value, the NCS would advise this to be set at 100 for a residual ADR scheme; this however will need consideration of the service or product the claim is over. It is essential that the cost of mediation does not outweigh the value of settlement or for the initial service/product. Q7. What funding model would be appropriate for a residual ADR scheme? Can an ADR provider operate effectively if it is reliant on case fees rather than annual fees? 7.1 When looking at the funding model for a residual ADR scheme; the NCS advise that a low annual fee is paid by businesses who want to use the scheme and then an additional case by case fee charged when the business uses the ADR. 7.2 A residual ADR scheme will have widely varying cases to handle, therefore, the cost of handling these cases will also vary. Whilst sector specific ADR schemes will be able to compare and contrast previous cases to establish the cost of a case, this will be challenging for residual operators. The NCS therefore feel that a low annual fee should be paid to cover the basic administration costs of case handling and towards the running and operation of the ADR service and once cases are then brought to the ADR provider, case fees can be charged for that specific case. 7.3 It is important annual fees are set to the most practical minimum level; ensuring businesses and industries with low claims and low value settlements do not indirectly cover the costs of other businesses/industries whose claims and settlements are much higher and more costly. A scheme, such as that run by the Pension Protection Fund, could prevent this cross subsidy.
Q8. Should a standard case fee be adopted? What would be an appropriate level? If not, how should the amount charged for each dispute be determined? 8.1 A standard case fee should not be set for ADR providers but should be flexible and reflect the sector, businesses and type of cases that are brought to the different ADR providers. 8.2 The NCS feel that case by case fee assessments will be most appropriate, comparing the factual scenario of a current case to previous ones. Precedent cases should be used to determine the fee where products and services of a similar value have been mediated over. 8.3 ADR providers and businesses should be able to negotiate annual fee arrangements if they so desire, with the potential for additional case fees to be charged if mediation is unusually costly for a particular case. Q9. Would it be better to have a single ADR body or several ADR bodies operating a residual ADR scheme? What would be the ideal number and what are the reasons for this? 9.1 NCS believe that there should be one residual ADR scheme in operation. Sector specific ADR schemes should be the first port of call for those seeking ADR, rather than residual schemes. If one residual operating body is adopted, this will prevent the creation of a larger residual ADR market and the reduction of use in sector specific providers. 9.2 The importance of promoting sector specific ADR schemes is due to the industry expertise their case holders acquire, and this knowledge can be used in other cases. There must be a conscious communications plan to encourage and notify businesses and consumers of the industry specific schemes. Q10. In light of the other requirements in the ADR Directive which are intended to assist consumers, would a consumer-facing complaints helpdesk be beneficial? 10.1 For any ADR scheme to be effective and proficient, consumers and businesses must have access to the schemes and advice, as and when required. Both parties must have knowledge of the avenues of redress available to them, as well as confidence that complaints will be handled appropriately. 10.2 We believe that BIS would not want to run and manage a helpdesk and would prefer a third party to provide the consumer helplines. As such, we would suggest that the Citizens Advice Bureau ( CAB ) take on this role. CAB already has an established reputation within the public sphere as an advisory body and as such, is already often a source of information for many consumers and businesses; therefore it would be appropriate for CAB to direct people to the appropriate sector ADR schemes, especially as the public have confidence in the service. Providing that a comprehensive list of recognised ADR providers is available, it is unlikely that CAB s duties would go beyond that of a sign-posting function, simply directing consumers in the right direction. 10.3 Furthermore, if a single residual ADR provider is adopted, the residual ADR operator could also direct cases to sector specific ADR schemes. This will also help with a residual scheme caseloads, which could easily become unmanageable. Q.11 Do you have any comments on the type of service it should provide and the extent to which it should examine the enquiries it receives?
11.1 As stated previously, the majority of calls received by the NCS are consumer queries requiring information and guidance and are dealt with in one sitting. It is imperative that if an advisory helpdesk is created, they solely operate to offer guidance to consumers on whether ADR is appropriate for their issue, which industry ADR schemes are available to them, and ensure they have completed any prerequisites before bringing a case before ADR handlers. 11.2 If a helpline is successfully established, consumers will be able to mitigate their losses and businesses will have a fairer chance to handle complaints at a more informal level, before needing to proceed further and incur avoidable fees. This should help consumers avoid case rejection where Article 4(a) of the Alternative Dispute Resolution (ADR) (2013/11/EU) 1 has been satisfied (if adopted). 11.3 The NCS feel it is key that the helpdesk does not provide specific case advice but is more a guiding body, answering the basic questions such as whether a business is part of a specific ADR scheme or, as stated above, which ADR schemes are available to them and how they may contact those schemes. Appointing a competent authority Q14. Do you agree that regulators should act as competent authorities for the ADR schemes that operate in their sectors? Yes. 14.1 It is essential that regulators act as competent authorities to ensure that standards are maintained across ADR provisions and cases are handled in an appropriate manner. All ADR schemes processes, regardless of sector, should meet minimum standards and these must be maintained. Q15. How should the fees paid by ADR providers to a competent authority be determined? Should the size of the fee depend on the size of the ADR provider (for example turnover or number of cases dealt with) or based on other factors? 15.1 We feel fees should be based on cases workloads. Q16. Do you agree that the Government should allow UK ADR providers to use all of the procedural rules listed in Article 5(4) of the ADR Directive to reject inappropriate disputes? If not, please explain your reasons. 16.1 Agree. Q18. Do you agree that the ODR contact point should only be required to assist with cross border disputes involving a UK consumer or UK business? 1 4. Member States may, at their discretion, permit ADR entities to maintain and introduce procedural rules that allow them to refuse to deal with a given dispute on the grounds that: (a) the consumer did not attempt to contact the trader concerned in order to discuss his complaint and seek, as a first step, to resolve the matter directly with the trader;
18.1 Agree. Q19. Should the ODR contact point be allowed to assist with domestic complaints on a case-by-case basis? 19.1 Agree. Q20. Do you agree that, where applicable, we should extend the six year time limit for bringing disputes to court by eight weeks, and mirror the amendment made to implement the Mediation Directive? If not, please explain why a different extension period is preferable. 20.1 Agree. Q22. Do you agree that in-house ADR should not form part of the UK s implementation of the ADR Directive? If you disagree can you please explain why? 22.1 Agree. The NCS feel in-house ADR schemes should not form part of UK s implementation of the ADR Directive. Businesses must be given the opportunity to process and deal with complaints internally first through methods that are most effective for that specific business and their customers. This enables a lighter, less formal approach, to take place between the interested parties before branching out into more costly ADR schemes and/or courts. Q23. Do you agree that the UK should allow certified ADR providers to make decisions that are binding? If you disagree can you please explain why? 23.1 Agree. Q24. Do you agree that the ODR Regulation should only apply to disputes initiated by a consumer, and should not apply to disputes initiated by a business? If not, can you please explain why? 24.1 Agree.