Money News

Scams cost UK consumers £7bn a year

Thursday 10 November, 2011

By Martin Fagan

Legislation is failing to keep pace with the digital revolution leaving online shoppers at the mercy of scammers, says parliamentary committee

Brits are being ripped off to the tune of £7billion a year with many of the criminal scams being operated online, according to the findings of an influential parliamentary committee.

In a report on consumer protection, the Commons’ Public Accounts Committeefound the current mechanisms for consumer protection are not always sufficient to the challenges presented by online technology.

The system of consumer protection failed because the nature of the scams had changed but the law had not, said the Committee.

"When the enforcement system was first established, trading was more localised and consumers tended to lose money through singular instances of malpractice, for example, by being overcharged or sold a short measure," the report said.

"Now, the increase in the number of companies who operate nationally and the trend towards online shopping have caused problems which are more likely to affect consumers on a national level."

The Committee also reported that fraudsters and rogue traders are slipping through the regulatory net because the majority of consumer law enforcement is carried out by local councils, while many of the rules are broken on a national level.

Scammers take advantage of this by setting up in one of the UK’s "enforcement deserts". Yet, the advance of technology meant that these traders could find their victims nationwide and the Committee report said there were no clear arrangements for which agency for consumer protection should take on the task of large, expensive nationwide cases.

“Consumers are being ripped off to the tune of £7billion a year by sellers of defective goods, dodgy doorstep traders and online fraudsters,” said Margaret Hodge, chair of the Public Accounts Committee.

“But the arrangements for protecting victims are incoherent and fragmented. All too often cases of consumers being ripped off fall through the cracks between enforcement bodies."

The enforcement of consumer law cost taxpayers £247 million in 2009-10, with local authorities spending £213 million of this on the provision of trading standards services with the remaining £34 million spent by central government.

Photo by Don Hankins