Thursday, 30 October 2008

Speech on Consumer Protection (Fair Trading) (Amendment) Bill: 25 August 2008

When I put my name forward for selection as a NMP, I had to submit a supporting essay. One of the things I wanted to speak up on was consumer protection issues. I didn't have much opportunity, at least until this bill came along (and now, unfortunately, the Lehman-linked structured deposits as well).

I was fortunate to have Sze Yong's assistance on this bill. He previously worked in CASE, and so had a strong personal interest in this area and also very helpful insights into the amendment bill. He has since moved on to do something else, and I wish him all the best, but he will be missed.

The video and text of my speech are below. I've also reproduced the Minister of State's resposnes to my speech.

Video of speech:

Speech on the Consumer Protection (Fair Trading) (Amendment) Bill

Mr Siew Kum Hong: Mr Deputy Speaker, Sir, I rise in support of the Bill.

The Consumer Protection (Fair Trading) Act took effect on 1st March 2004. Consumers and businesses have had over four years to become familiar with the Act with what is permissible under the Act and what is not. The Consumers' Association of Singapore, or CASE, as a specified body under the Act, has played a key role in giving teeth to the Act. This update of the Act is therefore timely.

While any enhancement to consumer protection is praiseworthy and to be welcomed, the Amendment Bill is nevertheless not perfect. I will touch on four areas.

Firstly, the Amendment Bill expands the jurisdiction of the Act to include financial products and services, motor vehicle sale contracts and timeshare related contracts. The maximum quantum for claims under the Act will also be increased from $20,000 to $30,000.

Sir, the inclusion of motor vehicle sale contract is timely and much needed. However, the amendments do not adequately address the issue of lemon cars which are new cars with many defects and problems. This is essentially the sale of a fundamentally defective product to a consumer.

While the purchase of a car from a car dealer will appear to be covered by the amended Act, the amended prescribed limit of $30,000 is inadequate. It seems arbitrary to me that the purchaser of a very cheap car can get proper redress if it is a lemon but not the majority of car buyers.

Here, I think it is important to note that $30,000 would be a very low price for a car, even for second-hand cars. It is not clear if lemon car cases are common. But this discrimination does not seem right in principle.

Financial products and services are also being brought under the Act. My first point is that even the amended prescribed limit for claims of $30,000 may be too low for claims in respect of such products and services. By way of comparison, the Financial Industry Disputes Resolution Centre, or FIDReC, hears cases with amounts of up to $100,000 for disputes between insured persons and insurers and $50,000 for other disputes, including disputes between banks and consumers. In fact, from the FIDReC Annual Report for 2006-2007, it seems that financial institutions have voluntarily submitted to FIDReC jurisdiction for disputes over amounts exceeding $100,000, such that the biggest claim adjudicated by FIDReC in its 2006-2007 financial year was actually $729,000.

But I am more concerned that, despite what is contained in the Amendment Bill, most financial products and services may end up being excluded from the ambit of the Act. According to the public consultation exercise conducted by the Ministry last year, the Ministry's intent was to exclude from the Act by way of regulations all financial products and services regulated by the Monetary Authority of Singapore.

What this means is that even if, today, this House passes the Amendment Bill to include financial products and services under the Act, tomorrow, the Minister may issue regulations that exclude the bulk of such products and services from the Act. I hope that that will not be the case.

Sir, in last year's public consultation exercise, the Ministry stated, and I quote, "MAS already monitors the financial services industry closely in its capacity as the regulator. Furthermore, MAS has regulatory and enforcement powers against financial institutions and representatives if they breach MAS' administered laws."

While I am sure that the MAS considers the interest of consumers when acting as the regulator, it nevertheless has other priorities as well. Furthermore, the Act contains important features that are absent from the MAS' regime.

Consumers have a private right of action against suppliers. There is the voluntary compliance agreement which can include provisions requiring the supplier in question to compensate consumers who have suffered loss or damage resulting from the unfair practice. CASE is also empowered to apply to the court for a declaration or injunction against offending merchants and the decisions of the court are subject to appeal and public scrutiny. These are all essential enforcement mechanisms implemented by the Act but absent from the MAS' regulatory regime. Crucially, many of these features relate to the compensation to consumers.

Sir, we are here today to debate the Consumer Protection (Fair Trading) Act. Let me repeat: consumer protection. On the other hand, MAS administers a regime to regulate banks and financial institutions. It may be fine for regulating the financial industry, but does it protect consumers? It certainly does not provide for compensation to consumers.

Regulation of merchants' behaviour is fundamentally different from compensation to consumers. The Consumer Protection (Fair Trading) Act encompasses both aspects. But the MAS-administered regime provides only for the former and not the latter. After all, if the MAS-administered regime was sufficient to protect the consumers, then why amend the First Schedule to the Act to bring financial products and services under the Act in the first place?

It would be highly disappointing if any financial products or services are excluded from the Act simply because they are regulated by the MAS. That would render completely pointless the inclusion of financial products and services into the Act. Many believe that Singapore is overly pro-business and too lacking in consumer protection. Such a move would simply prove such views to be true.

Therefore, I hope that the Minister will inform this House whether MAS-regulated financial products and services will subsequently be excluded from the Act by way of regulations and, if so, explain why and how such a move will nevertheless benefit and protect consumers.

Sir, my second point relates to clause 3 of the Amendment Bill. It amends the Act so that where a consumer has commenced legal proceedings against a merchant and subsequently CASE or a specified body applies for a declaration of injunction against that merchant, either the consumer or the merchant may apply to the court for a stay of the proceedings, pending the resolution of the application. It seems to me that the supplier is far more likely than the consumer to exercise this right. There are a number of problems with such a mechanism.

Firstly, it seems to me inherently unfair that a consumer's course of action against a merchant who has engaged in unfair practices can be held hostage to a separate application by a specified body. As the saying goes, "Justice delayed is justice denied."

I understand that, in most cases, the consumer would already have approached CASE before commencing legal proceedings against the merchant and, obviously, he was not willing to rely on CASE. What happens if the merchant dissipates his assets, pending the resolution of CASE's application? The consumer would then have been deprived of his recourse against the merchant through no fault of his own.

If the worry is of conflicting outcomes between the consumer's case and the application to the court for an injunction or declaration, then an alternative approach could be to declare that the decision in the consumer's case will not affect and have no precedential value in the other case.

Another approach that is fairer than what is in the Amendment Bill will be to allow only the consumer and not the merchant to apply to the court for a stay of the legal proceedings so the consumer can choose for himself whether or not he would like to wait for the outcome of CASE's application.

The new section 6(9) of the Act is also unfair to consumers. This provision permits the court, acting on its own motion, to discontinue proceedings that have been stayed, if there are no further steps in the proceedings for two years.

This is regardless of the status of the application by a specified body for a declaration of injunction. In other words, the stayed proceedings can be discontinued even if the other application drags for more than two years and remains unresolved.

Sir, justice should not be held hostage to the court's desire to clear their docket of outstanding cases, especially where the legal proceedings were stayed through no fault of and against the wishes of a consumer. While the Amendment Bill does specify that the discontinuance is without prejudice to the consumer's right to reinstate the action, it seems to me unfair that the consumer, and even the supplier, should have to bear the cost and inconvenience of effecting a reinstatement.

On a related note, in light of the power of the court to discontinue proceedings if no steps are taken for two years, the Act should require either the court or the supplier to notify the consumer of the outcome of the application. The consumer may not be able to monitor the other application and so may not be aware of its outcome and the possible additional steps that he can or should take.

Sir, my third point concerns the Small Claims Tribunal. The amendments will effectively expand the jurisdiction and caseload of the Tribunal. I trust that the Ministry and the Subordinate Courts will ensure that the Tribunal is appropriately staffed and equipped to handle this expansion.

I would also like to propose that decisions of the Small Claims Tribunal, at least those in proceedings commenced under this Act, be published. Decisions of the Tribunal are currently not published, so consumers have little guidance as to the relevant factors that the Tribunal will consider when coming to a decision.

I have received some troubling anecdotal feedback about the Small Claims Tribunal.

Firstly, the Tribunal's decisions are inconsistent. The Tribunal also seems to construe "services" very narrowly, as having to require skill and labour. Accordingly, it seems that the Tribunal has ruled that cases, eg, car rental disputes, fall outside its jurisdiction which, in my view, runs contrary to the clear intent of the Act and a purposeful construction of the term "services".

I have also been told that some businesses have had so many complaints against them that their representatives before the Tribunal have become extremely experienced, thereby facing lay consumers who may well be appearing in a court setting for the very first time at a severe disadvantage when they appear before the Tribunal.

Sir, I believe in the usefulness of the Small Claims Tribunal where lawyers are not allowed and so I support in principle the central role of the Small Claims Tribunal in the Act. However, it seems to me necessary for the Tribunal to publish its decisions or, at the very least, summaries or digests of cases. This will address the criticisms I have mentioned, introduce some important transparency into the process, and provide valuable clarity and guidance to consumers.

Finally, I would like to ask the Minister whether the Act has been effective in preventing what may well be called "serial offending". It is possible for an unscrupulous businessman to set up a business, such as a time-share company, that engages in unfair practices prohibited under the Act. When complaints are lodged against the company and it faces legal proceedings, whether from consumers or CASE, they can simply shut this company down and start a new one and continue preying on consumers.

The Act and the amendments do not address this, and I am told that this does happen in practice. Perhaps, in addition to the amendments currently before this House, the Ministry should also amend the Act to apply its mechanisms to the person behind these companies. For instance, section 9 of the Act could be amended such that if CASE applies for an injunction, then the court is explicitly empowered to extend the injunction to apply against the company's directors and shareholders as well, if it is satisfied that such persons have previously been involved in other companies that have engaged in similar unfair practices.

Sir, in conclusion, the Ministry has done well to update the Act to keep it relevant, in light of changing circumstances. Nevertheless, there remains much room for improvement and I hope that the Minister can address the issues I have raised.

With that, I support the Bill.

The Minister of State for Trade and Industry (Mr Lee Yi Shyan): Sir, I want to thank the various Members for speaking passionately and giving good thoughtful suggestions as to how the Act can be further enhanced.


Now, I want to also touch on Mr Siew's questions on lemon law. This subject of lemon law has been raised before in the previous parliamentary discussions. In our subsequent revision, we would work with CASE to see if introduction of this law would indeed serve the intended benefits of the consumers in Singapore.

With regard to the other suggestion by Mr Siew on improving the effectiveness of the Small Claims Tribunals, we welcome the suggestion and would convey these suggestions to Ministry of Law because the Small Claim Tribunals belong to the Subordinate courts system. He also asked whether CPFTA is indeed effective against the serial offenders because some of these may close and re-open businesses. For this kind of situation, indeed, we are working with CASE to see how we can have a better oversight of companies or directors behind the companies who are engaged in these unfair practices with other agencies that have supervision over them.

Mr Siew Kum Hong (Nominated Member): Mr Deputy Speaker, Sir, I have a clarification for the Minister of State.

I think the Minister of State has misunderstood my point about the inclusion of financial services and products under the Consumer Protection Fair Trading Act.

My point was that last year's public consultation exercise included a set of draft regulations called the Consumer Protection (Fair Trading) (Regulated Financial Products and Services) Regulations under which MAS regulated financial products and services were to be excluded from the Act after they had been included in the Amendment Bill. So my question was to ask the Minister of State to clarify whether the Ministry intends to issue such regulations after the enactment of this Amendment Bill.

Mr Lee Yi Shyan: Mr Deputy Speaker, I do not have the answer on this particular point, but I would check and come back to Mr Siew.

[I subsequently filed a PQ on this question, which I will publish shortly]

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