Business

Scam-tackling system 'fragmented'

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Media captionAlex Shearaschkin is the report author and says more work needs to be done to protect consumers

The system to protect consumers from scams that cost them billions of pounds is "fragmented and significantly underequipped", a report has concluded.

Trading standards departments, which are facing cuts in funding, are using two incompatible databases to share intelligence, the National Audit Office (NAO) said.

Meanwhile, some local departments are not taking on UK-wide cases.

The cost to consumers of these cases is at least £4.8bn a year, the NAO said.

"Consumers in this country believe that they are well-protected but the reality does not support this view," said Amyas Morse, head of the NAO.

"The system for enforcing consumer law is fragmented and significantly underequipped to tackle a whole range of serious consumer scams."

Rip-offs

Bogus e-mails aimed at conning people out of their money cost UK consumers an estimated £3.5bn a year on a national level. Counterfeit goods add another £1.3bn onto that bill.

Consumers also lost money as a result of shoddy or unnecessary work sold by rogue traders on the doorstep. But the NAO said there were no reliable figures showing the total amount lost.

The NAO said that the lack of proper evaluation of these figures was leading to an inefficient allocation of resources to tackle these rip-offs nationally.

While some trading standards departments, operated by local authorities, did take on national "cross-border" cases, many did not. Smaller departments, some of which had just two members of staff, would be less likely to take them on.

Three of 11 regional teams that were supposed to tackle issues across a number of council areas have been closed, the report said. The remainder only have short-term arrangements.

In addition, the service is facing budget cuts. Annual funding from the Department for Business is expected to fall from £213m now to between £140m and £170m by 2014.

Data-sharing

Rogue traders tend to operate in one area, then move on to others, partly to escape the authorities.

As a result, the Office of Fair Trading set up an intelligence-sharing database in March 2010. The NAO said only half of the 197 trading standards services in England had committed to using it.

Another 30 services were using an alternative, incompatible database which had been set up by one trading standards region.

The government-backed Consumer Direct service, which allows consumers to report incidents and receive advice, is soon to be taken over by Citizens Advice.

The NAO warned that this must still be a useful source of intelligence for trading standards officers when the service is taken over.

There remained a "lack of clarity" over who should take on prioritised cases.

Consumer minister Edward Davey said the report highlighted why changes were needed.

"The consumer protection landscape is in need of reform," he said.

"This is why we announced our intention to change the complex and overlapping system. Shortly we will publish our detailed proposals to improve the landscape for the benefit of consumers and businesses.

"The report rightly highlights that the ability of the current system to tackle consumer detriment across local authority boundaries is patchy at best. This is one of the key issues that the Department for Business consultation addresses."

The overall cost of unfair trading is estimated to be more than £6bn a year.

"There is no doubt that the system as a whole is under-resourced. When a £6.2bn problem is addressed with a £213m - and falling - solution we know there are going to be shortfalls," said Andy Foster, of the Trading Standards Institute.

"What is important is that we use that resource to best effect to protect those citizens that are the most vulnerable to rogues, loan sharks and criminals who take advantage of them and that we empower the rest of the community to become consumer champions so that the system is still effective, but is not a drain on public resources."

Steve Greenfield, who chairs the Association of Chief Trading Standards Officers, accepted there were some issues with how cases were referred to national authorities.

"We should not lose sight of the fact that local authority trading standards services take on large scale cases for the benefit of consumers and businesses day-in day-out and continue to punch above their weight," he added.

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