Second Reading Speech by MOS Lee Yi Shyan on the Consumer Protection (Fair Trading) (Amendment) Bill

Second Reading Speech by Mr. Lee Yi Shyan, Minister of State for Trade and Industry, on the Consumer Protection (Fair Trading) (Amendment) Bill 

Mr Speaker, Sir, I beg to move: “That the Bill be now read a second time.”

Overview of the Consumer Protection (Fair Trading) Act

The Consumer Protection (Fair Trading) Act, or CPFTA, is a major pillar of our consumer protection framework. It provides consumers with legal safeguards against unfair practices; and enables them to have recourse to civil remedies before the courts. The Act also allows specified bodies to enter voluntary compliance agreements with, or apply for injunction orders against errant traders. Suppliers are required to provide a cooling-off period for direct sales and timeshare contracts.

Since the implementation of CPFTA in March 2004, the number of cases arising from the Act has been increasing. In 2007, consumers lodged nearly 750 CPFTA-related complaints with the Consumers Association of Singapore (CASE). CASE also entered into 8 Voluntary Compliance Agreements (VCAs) and obtained 3 injunctions against businesses. This shows that the CPFTA has been effective.

In July 2006, MTI & CASE jointly established a taskforce to review the CPFTA to take into account the new trends and patterns of consumer disputes. The taskforce’s recommendations, which were accepted by my Ministry, became the basis for wider public consultations with consumer and industry bodies from October 2007. We thank the many who contributed generously to the improvement of the Amendment Bill.

Key Amendments

Sir, the Bill before us is the outcome of the work mentioned above. Let me now outline the main amendments.

Inclusion of Financial Products and Services

Clause 8 of the bill extends the application of the CPFTA to financial products and financial services which are currently excluded. With the removal of the exclusion, the CPFTA would be applied to the financial products and services regulated under certain legislation administered by the Monetary Authority of Singapore (MAS) and under the Commodity Trading Act with the commencement of this Bill. This will be followed by the financial products and services that are regulated under the Moneylenders Act and the Pawnbrokers Act in 2009 and 2010 respectively when the Ministry of Law completes its review of these legislation.

By extending the CPFTA to financial product and services, two consequential amendments have become necessary:

First, Clause 4 requires the court to consider whether a consumer had sought to resolve a dispute through a specified dispute resolution scheme where available. My Ministry intends to designate the existing Financial Industry Disputes Resolution Centre Limited[1] (FIDReC) as the relevant scheme for disputes relating to financial products and services supplied by FIDReC subscribers. In this way, consumers will be encouraged to resolve their disputes with financial institutions via FIDReC first before going through the courts.

Second, Clause 7 clarifies how the prescribed claim limit should apply when a consumer commences multiple actions involving the same unfair practice. My Ministry intends to provide that in such cases involving financial institutions, the claim amount for each of the actions should be aggregated for the purpose of applying the prescribed claim limit.

Sir, I will now move on to the other main amendments.

Regulation of Timeshare Products

Sir, timeshare-related disputes have been an increasing source of complaints. These involve businesses that claim to help consumers dispose of their rights under timeshare contracts, a business model that has emerged in recent years. To address this, Clause 2 inserts a definition of “time share related contract”. My Ministry intends to extend the cooling-off period that currently covers timeshare contracts to these businesses.

Prescribed Claim Limit

To reflect the increasing claim values of consumer transactions, Clause 3 increases the prescribed claim limit from $20,000 to $30,000. With this increase, 99% of CPFTA-related complaints CASE received would be covered[2].

Jurisdiction of Small Claims Tribunal
Sir, the Small Claims Tribunals have been a crucial pillar of the consumer protection framework. The Tribunals are designed to handle small and straightforward consumer disputes, and are therefore able to provide consumers with speedy and inexpensive resolutions. We are glad that the Tribunals are able to expand their jurisdiction to cover new areas of consumer disputes.

Clause 4 extends jurisdiction to cases related to firstly, the cancellation of timeshare and timeshare-related contracts during the cooling-off period, and secondly, a deposit paid in a motor vehicle sale contract.

Clause 9 further extends jurisdiction to claims relating to a dispute arising from a contract to buy or sell foreign currency notes made with a licensed money-changer.

Limitation Periods

Specified bodies currently have to commence an action against errant traders within a year of the last material event on which it is based. Experience has shown that this is insufficient time for specified bodies to build their cases and explore alternatives to litigation such as VCAs with traders. Clause 5 thus extends the limitation period from one to two years.

Clause 5 also extends the limitation period for consumers from one to two years. In addition, Clause 3 allows the court to stay the proceedings for a consumer’s action when there is another action by a specified body relating to the same unfair practice. These amendments allow consumers to better rely on the efforts of specified bodies.

Burden of Proof

Sir, traders are often in a better position than consumers to keep proper records of their actions. Clause 6 gives the Minister the power to make regulations to place on suppliers the burden of proving that they have complied with certain requirements of the CPFTA or its regulations. My Ministry intends to apply this in two specific cases. First, suppliers must prove that they have given the consumer information notice to inform consumers of their rights in relation to the cooling-off period. Second, motor vehicle dealers must prove that they have informed consumers in writing of their deposit refund policies, and applied for a loan in terms agreed by the consumer.

Regulations

To operationalize the proposed amendments, my ministry is finalizing the supporting regulations, as well as implement other recommendations made by the review taskforce. We will issue them shortly.

Conclusion

In conclusion, Sir, our overall approach of 'caveat emptor' to consumer protection has served us well, and remains the first-line and best defense for consumers’ interests. Continual consumer education is therefore critical in ensuring informed consumers making smart choices.

The proposed amendments in this Bill reflects a concerted effort by all the stakeholders to make the existing consumer protection framework even more robust. In drafting this Bill, we have taken great care to ensure that it is both pro-consumer and business-friendly. We believe that a sustainable consumer protection framework is also a win-win framework embraced by both consumers and businesses.

Sir, I beg to move.

[1]FIDReC is an existing independent institution that specializes in resolving disputes between financial institutions and consumers. It was established as an affordable and accessible avenue of recourse for consumers, thus it makes sense to leverage on its expertise. Its adjudication decisions are binding on the financial institution, but not the consumer.

[2]The SCT’s claim limit remains at $10,000 (or $20,000 with the consent of both parties). With the new CPFTA claim limit, consumers can continue to seek adjudication at the SCT, but claims above the SCT’s claim limit will be adjudicated at the Subordinate Courts.