Consumer rip-offs 'worth £7bn'

empty trouser pocketBritish consumers are being ripped off by scams and frauds to the tune of almost £7 billion a year, but official arrangements to protect them are "incoherent and fragmented", a parliamentary report has warned.

The vast majority of consumer law enforcement is carried out by local councils, but abuses are increasingly operating at a regional or national level, where the protection system is "inadequate", said the House of Commons Public Accounts Committee.
The consumer protection system has failed to keep up with the development of problems involving online shopping, like email scams or fraud using chip and pin and credit cards, said the report.

The Government's plans to abolish the Consumer Focus watchdog and scale down the Office of Fair Trading risk reducing the authorities' capacity to deal with national and regional scams and to keep pace with the latest rip-offs devised by fraudsters, it warned.

The cross-party committee called on Vince Cable's Department for Business to ensure the provision of "a system fit for the modern era", well enough resourced to protect consumers and ensure a robust response to new and sophisticated scams.

The report put the cost to consumers of defective goods, dodgy doorstep sales and online fraud at £6.6 billion, with £4.8 billion of it occurring at a regional or national level.

Just £34 million was spent by central Government on consumer protection at a regional and national level in 2009/10, and the figure has declined further thanks to the closure of an £8 million Department for Business fund to tackle scams and malpractice regionally, said the MPs.

Local authority trading standards services are set to lose around one third of their budgets, which are slated to decline across Britain from £213 million in 2009/10 to around £140 million in 2014, said the report. Even at local level, there is a postcode lottery, with some councils employing as few as two trading standards officers, compared to others with 100 or more.

The report voiced concern that fraudsters are attracted to these "enforcement deserts" where they can ply their trade with little fear of disruption. Meanwhile, penalties for scammers are "often insufficient to provide an adequate disincentive to would-be offenders", said the report. In many cases, the potential profit from a consumer fraud can outweigh the maximum available penalty.

Committee chairwoman Margaret Hodge said: "Consumers are being ripped off to the tune of £7 billion a year by sellers of defective goods, dodgy doorstep traders and online fraudsters. But the arrangements for protecting victims are incoherent and fragmented."

© 2011 Press Association
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