Pragmatist’s Posterous

To clear their desks ahead of the summer (and clutter ours to no useful purpose), UK officials responsible for Business, Innovation and Skills have recently released a white paper outlining the government's approach to consumer policy, presumptively entitled "A Better Deal for Consumers".

It appears the paper has been prompted by the "downturn" and "the way consumer markets are changing because of the effects of globalisation, and the increasing use of technology by consumers and business to buy goods and services." Which should read: "a dog's breakfast of either previously announced or 'new' but belated attempts to help the vulnerable, tinker with consumer credit, and update enforcement powers and some consumer law."

Don't get me wrong. There's some good stuff in here. But it's beyond me, for example, why it's taken until 2009 to call for a quicker solution to the saga of the bank charges litigation (we've owned some of the key defendants for some time), or to begin the no doubt lengthy process of banning unsolicited credit card cheques, restricting the basis on which credit card issuers can reprice cards after issuing them or ensuring that credit cardholders' repayments are credited towards the most expensive aspect of their card bills first. And, while anything to help those who are overly indebted is to be applauded, we've already heard about the £290m of government funded loans in the budget. And, in the vast scheme of things it's hardly worth mentioning that the government "will invest a further £300,000 in free face to face debt advice [which] will give an immediate boost to debt advice capacity for six months and enable the equivalent of 12 full-time debt advisers to help an extra 1,200 people struggling with crisis debt."

The 'meat', if there is any in this paper, is simply a reference to the unfortunate process of gold-plating the Consumer Credit Directive, and "bringing forward, in due course, a new Consumer Rights Bill which will [no doubt gold-plate] the proposed EU Consumer Rights Directive". The latter exercise has of course been rather undermined by the lack of any real evidence of detriment (see the EC's Consumer Markets Scoreboard).

Guess it's a case of hurry up and wait for that better deal.

Here's an extract of the menu in more detail:

Helping the vulnerable:

• Help to support homeowners and social housing tenants in arrears, and better legal protection for mortgage holders and tenants

• ”Breathing space” relief for consumers overburdened with arrears on their utility bills and other unsecured debts

• A new debtors’ guide to help those with debt problems understand their options

• A new self-help debt advice toolkit to support debtors who want to negotiate repayment proposals with their creditors themselves

• A Money Guidance service in the North West and North East of England to help people make better financial decisions and avoid problem debt

• A new dedicated NHS helpline to offer healthcare support to those experiencing recession-related stress and anxiety

• Improved guidelines for health and social care workers to support people with mental health problems and overburdened with debt

• Reviews into how effectively energy and water suppliers protect vulnerable customers from disconnection and help customers with problem debt

• Swift enforcement action against debt write-off scams and against firms who exploit the vulnerable in debt

• Measures to ensure more responsible debt recovery practices by debt collectors and bailiffs

• Programmes to reduce household energy bills.

Tinkering with consumer credit:

• A review of the regulation of credit cards and store cards, including a ban on the sending of unsolicited credit card cheques

• Ensuring consumers can access impartial support on choosing and managing credit cards and other consumer credit products

• [Gold-plating] the Consumer Credit Directive, including new requirements on all lenders:
  • to explain their products to consumers adequately before they enter into a contract, including the consequences of any failure to repay
  • to check the credit worthiness of consumers before they lend to them to follow guidance from the OFT to tackle irresponsible lending practices

• A review by the OFT of high cost credit markets

• A continuing programme of reforms to make the credit market work effectively for consumers and lenders.

Updating enforcement powers:

• A series of pilot projects to test the use of new powers to deliver compensation for consumers

• A new national strategy and specialist team for internet enforcement on consumer issues

• A central “Fighting Fund” to tackle rogues operating on a big scale

• A new Consumer Advocate who will co-ordinate work to educate consumers and be a champion for groups of consumers who have suffered a loss at the hands of a business

• A mechanism for consumers to get money back that has been recovered from overseas scams

• Support for product safety testing of imported goods at major ports

• Stronger penalties for rogue traders through new banning orders

• Simplifying the confusing array of sources of information and advice to ensure consumers can more easily find the support they need

• A new Consumer Rights Campaign.

Updating some consumer law:

• Developing rules on new “digital” products to ensure the core principles of consumer protection apply

• Looking at how the law on misrepresentation and duress can be made simpler, more transparent and accessible to business and consumers

• Reforming consumer law and simplifying weights and measures legislation without diluting consumer protection

• Modernising Trading Standards powers to help them deal more effectively with modern trading conditions

• Bringing forward, in due course, a new Consumer Rights Bill which will [no doubt gold-plate] the proposed EU Consumer Rights Directive, the lack of any evidentiary basis for which is illustrated in the EC's Consumer Markets Scoreboard.

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Last August, I expressed some doubt that QQ coins represented the future of money for various reasons. Now Finextra reports that on Saturday the Chinese government banned the use of virtual currency, including the dominant QQ coins, to purchase real world goods and services, as well as the use of virtual money for gambling. Its use is now restricted to buying goods and services supplied by the issuer. It seems to be the second ban in this vein, according to Digital Money Forum, the previous one relating to the purchase of real world property and virtual currency trading. Whether this second attempt will rein in the misuse of Chinese virtual cash remains to be seen.

At least the Chinese government has not banned the use of stored value products altogether. Given China's authoritarian stance in some areas, that should be a good sign for the future of e-money.

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Interesting report in El Reg on why "It's time to show most passwords in clear text as users type them," according to "Usability expert Jakob Nielsen and security expert Bruce Schneier."

Apparently masking the password as the user types (e.g. with blobs or asterisks) adversely affects usability and security. Users have a tendency to choose simple passwords, or cut and paste, to ensure they get them right. And frustration with errors may mean users don't bother to enter the site at all.

I wonder to what extent users might now expect to see password masking, and whether they might judge a site which doesn't use it as somehow less secure. To this point, the commentators suggest allowing users to enable password masking by ticking a box, especially where "shoulder-surfing" may be a risk (e.g. Internet cafés or open plan offices).

This would seem worth trialling at the very least.

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The United Nations Safe Internet Committee (UNSIC) announced on Thursday that its web filters would no longer accept any Australian content. A spokesman explained: "The Australian government warned us that it has lost control of Internet content, and we should not accept any further Internet content from its servers until the problem is resolved."

When asked for the Australian government's response to those who believed in an open, neutral Internet, the UNSIC spokesman added, "Talk to the hand".

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I should start my take on the "Digital Britain report" by making one thing clear: the fact that the government has issued the report is itself a Good Thing. The government does have a role to play in fostering and facilitating the growth of the digital world.

In that respect, the most important message in the whole document is this:

"We are at a tipping point in relation to the online world. It is moving from conferring advantage on those who are in it to conferring active disadvantage on those who are without, whether in children’s homework access to keep up with their peers, to offers and discounts, lower utility bills, access to information and access to public services. Despite that increasing disadvantage there are several obstacles facing those that are off-line: availability, affordability, capability and relevance."

However, the terrible news is that the detail of the report is merely a cascade of top-down recommendations to institutional problems, rather than a genuine attempt to clear the obstacles to every one of us seizing control of our dealings with government, banks, utilities, broadcasters and others.

Take the word "relevance" in the above quote, and consider the following passage that Technollama has extracted:

“The popularity of X-Factor and Britain’s Got Talent shows the enduring drawing power of content-creating talent that few people possess. The digital world allows more of that talent to find its way to more consumers and admirers than ever before. But it is not wholly democratic: some have the talent to create content; many others do not. As throughout history, there need to be workable mechanisms to ensure that content-creators are rewarded for their talent and endeavour. And the need for investor confidence is key. User generated videos can be hugely popular, but there remains a healthy appetite for big movies costing many millions to produce.”

It's a sad reflection on the government's understanding of digital Britain, that "X-Factor" and "Britain's Got Talent" are not only seen as "relevant", but also epitomise Britain's "content-creating talent". It is deeply insidious for the government to claim that the digital world is "not wholly democratic". This is view of the online world is simply false. The digital world is much, much more important, relevant and creative than is suggested, and hugely democratic - much more so than this government would like. Television and user-generated video platforms are merely a part of a co-operative mix of many different types of web site that are increasingly inter-linked and intertwined, enabling access to a huge range of content in different formats from different people at different times on different platforms and networks, depending on where people are and what they're doing. "X-Factor" is just one pixel on a much larger screen.

So let's not allow a few television shows to be the Trojan horse for a bunch of protectionist measures for Britain's beleaguered entertainment institutions.

Just because television has "gone digital", does not mean that TV content is a proxy or yardstick for all digital content. Similarly, the fact that a few record companies have made uncorroborated guesses that they'll make £1bn less in CD sales over the next 5 years, must not colour our view of file-sharing or distract us from understanding the value of Net Neutrality. Their digital music sales increased by 28% in 2007, after all. And they aren't the only people relying on the digital media to release music. Furthermore, several studies on the impact of file-sharing appear to negate the assertion that file-sharing adversely affects creativity.

It is great that the government has demonstrated a willingness to foster the growth of digital Britain. But it is also extremely disappointing that the "vision" is for us all to be glued to a screen watching wannabes singing other people's songs.

FYI, I've extracted the government's proposed "Actions" below, and may comment in more detail on some of them later:

• The Government will look to Ofcom to formalise the Consortium of Stakeholders to drive a new National Plan for Digital Participation.


• The Government will ask the Consumer Expert Group to consult and report on the specific issues confronting people with disabilities’ use of the Internet in Digital Britain.


• The Government will write to the Channel 4 Board asking it how it can further contribute to driving Digital Participation.


• In order to ensure the delivery of the Universal Service Commitment, we will establish a delivery body – the Network Design and Procurement Group – at arm’s length from central Government.


• The Caio Report recommended relaxation of regulations on the installation of overhead lines to lower deployment costs.The Government proposes to launch a consultation, by Summer 2009, on the impact of any amendment to the Code governing this.


• The Government intends to consult on the proposal for a general supplement on all fixed copper lines for a Next Generation Fund.


• The Government will have an independently produced guiding technical arbitration on the timing and cost of 900 refarming (and other related issues), paid for by an industry fund.


• The Government will work with manufacturers so that vehicles sold with a radio are digitally enabled by the end of 2013.


• On Digital Radio, the Government has asked Ofcom to consult on a new map of mini-regions.


• Alongside the Digital Britain Final Report the Government is publishing a community radio consultation seeking views on changes to the current licensing regime.


• Alongside the Digital Britain Final Report, the Government is consulting on a proposal to legislate to give Ofcom a duty to take steps to reduce copyright infringement.


• The Intellectual Property Office is considering the scope to amend the copyright exceptions regime in areas such as distance learning and the preservation of archive material and intends to announce a consultation on these later this year.


• The Government launched its copyright strategy


• The Government intends to consult on legislative reform in respect of orphan works.


• The Technology Strategy Board will lead and coordinate the necessary investment for Next Generation Digital Test Beds and has allocated an initial budget for £10m for this purpose.


• The Government will consult openly on the option of a Contained Contestable Element of the Television Licence Fee, carrying forward the current ring-fenced element for the Digital Switchover Help Scheme and Marketing (c.3.5% of the Licence Fee) after 2013.


• We will take the views of the Channel 4 Board on the draft updated statutory remit for C4 Corporation as set out in this Report.


• The OFT will amend its guidance to ensure that in cases relating to local and regional newspaper mergers raising prima facie competition issues the OFT will ask Ofcom to provide them with a Local Media Assessment.


• The Government is inviting the Audit Commission to undertake an inquiry into the practice of local authorities taking paid advertising to support information sheets.


• Commercial public service broadcasting liberalisation, including regional news, analogue licences and advertising minutage


• The Technology Strategy Board has assigned an initial budget of £30 million to advance Digital Britain related innovation.


• The Government will carry out a major test in late 2009 of our ability to manage and recover from a major loss of network capacity.


• The Information Commissioner’s Office plans to consult later this year on a new code of practice in relation to “Personal Information Online”.


• The Government will consult on the penalties that Ofcom is able to impose for contraventions of the Communications Act 2003 and, in particular, the level of the fine it can impose in relation to persistent misuse cases.


• Led by the Contact Council, chaired by the Cabinet Office, Government will take forward proposals for developing a Digital Switchover of Public Services Programme starting in 2012.


• We propose that DCMS, BIS and Ofcom carry out an assessment, to be completed by the end of this year, of the opportunity for bringing together some or all of the delivery agencies either into one body or through a federated structure to achieve economies of scale and greater operational efficiency.

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Yep, the UK's bureaucratic alchemists are at it again, folks. They've taken a leaden, ill-conceived Consumer Credit Directive (2008/48/EC) and extended its application to UK products that are out of scope, "in order to maintain a comprehensive, homogenous set of rules" (see para 1.9), while rigidly interpreting many terms not defined in the CCD to further complicate the awkwardly prescriptive consumer credit regime.

Add to that over 100 pages of impenetrable bureaucratic mumbo jumbo, 68 incredibly complex questions and an implementation deadline of June 2010, and say goodbye to any more retail financial services innovation for at least 2 years while we try to resolve all the uncertainty.

Moreover, the complexity of the one-size-fits-all regime being proposed, save for a 'light-touch' exemption for bank-only overdrafts, will give banks an even greater advantage over non-banks in providing consumer credit. Product development will be constrained by a complex and awkward regulatory regime, leaving many consumers with overdrafts (or loan sharks) as the 'easiest option'. In turn, consumers will be exposed to tighter credit conditions being imposed by banks, who will enjoy an advantage in 'up-selling' their own credit products to the more creditworthy.

Overall, the result will be less choice and poorer value for consumers, and a feast for banks and loan sharks alike.

Gareth Thomas, the Minster responsible, has a lot of explaining to do. But maybe he figures it's all over for him, anyway?

Meanwhile, the so-called "Better Regulation Executive" appears to be sleeping peacefully, secure in the assumption that all this nonsense delivers on a commitment to regulation that is:

• "transparent" - this extended scope was not revealed as the UK's intention when the CCD was consulted upon at EU level.
  


• "accountable" - why should national bureaucrats decide the scope of an EU law?


• "proportionate" - but it goes beyond the scope of the CCD, and is therefore disproportionate.
  


• "consistent" - but it's inconsistent with the CCD, and as such fails to deliver a "harmonised" or consistent cross-border credit market, which the CCD was (misguidedly) intended to catalyse (see Article 22).
  


• "targeted" – far from it, these are explicitly described as a "homogenous" set of rules.

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