Daksha Mistryrevisits the guidelines for the existing ADR and the newly introduced ODR and what implications they had for the motor finance industry

Earlier this year, Daksha Mistry, DWF director, submitted a feature to Motor Finance, "Will new EU guidelines take consumer disputes out of court?" This feature looked at the guidelines for the existing Alternative Dispute Resolution (ADR) and the newly introduced Online Dispute Resolution (ODR) and what implications they had for the motor finance industry. Since the publication of the article, there have been two updates on ODR/ADR. Daksha explains below.

The Department for Business, Innovations and Skills (BIS) – Consultation response on EU Proposals on ADR – by Legal Services Consumer Panel on 24 Jan 2012.

The BIS carried out a consultation on the European Proposals of ADR and ODR. The comments made so far by the body is that these guidelines would only work if participation of traders was made mandatory. However, there were some concerns around the fact that traders would be able to file complaints against consumers. This is understandable, as it could leave an open minefield for all sorts of disputes to arise, muddying the waters between what is a legitimate issue as opposed to a general gripe.

The panel fully supported any strong overlap the ODR and ADR may have with the Ombudsman Services, which provides independent dispute resolution for consumers in the UK. They also asserted that any amendments in legislation should be implemented through the Legal Ombudsman. In terms of considering a competent authority, the panel suggested that the Office of Fair Trading would be the most suitable, along with any other sector regulators.

It was agreed by the BIS that the ODR/ADR proposal will supplement first tier complaints handling rules within the legal profession, and would also help to break down barriers that discourage consumers from complaining.

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Overall, the panel suggested that the UK should use the directive as an opportunity to ensure that there is a more joined up approach when handling consumer complaints.

The Finance and Leasing Association (FLA) – Response to the Department for Business’ call for evidence on the EC Proposals on the use of ADR – 31 Jan 2012

The FLA Lending Code already largely conforms to the provisions set out in the directive, as it sets out standards of good practice for the finance industry and provides consumers with the reassurance that they are dealing with reputable business. The Lending Code is backed by free complaints and conciliation schemes, and if issues cannot be resolved then they are referred to the UK Financial Ombudsman Service.

Furthermore, section 75 of the Consumer Credit Act 1974 offers consumers to seek redress.

The FLA considered that there are savings to be made to avoid costly court procedures, but generally, experience has shown that ADR is free and therefore additional costs would not be envisaged. It would be seeking a competent authority regulator to act impartially and allow easy access to information.

The body is looking for the Lending Code to be included within the directive, as its own scheme already covers what the directive is setting out to achieve, and any cross-border disputes that come to the FLA are passed to the European Consumer Centres Network to deal with.

Daksha Mistry is director of corporate & asset finance at DWF