QMU Confusion, gaps, and overlaps -A consumer perspective on alternative dispute resolution between consumers and businesses
Through the Citizens Advice Consumer Service we advised on more than 400,000 consumer complaints over the past 12 months. The complaints we see vary from defective second-hand cars to substandard service from an energy provider. Alternative Dispute Resolution (ADR) can offer an inexpensive and effective solution to individual consumer disputes, as an alternative to courts. For many consumers, non-court-based schemes may be the only realistic option to resolve these disputes.
Yet while some ADR mechanisms work well, previous Citizens Advice research on Complaints Handling suggests that many consumers have limited or no options for redress. The overall ADR landscape is patchy, with gaps, weaknesses and overlaps in coverage. This varied landscape leads to inconsistent results for consumers. In some cases, gaps make it hard for consumers to act on their statutory rights to redress.
We wanted to explore this idea further, to get an in-depth understanding of ADR provision across consumer markets. To do this we commissioned Queen Margaret University’s Consumer Dispute Resolution Centre and the University of Westminster to compare the performance of ADR schemes across a wide range of consumer markets. We asked, do ADR schemes meet consumer expectations and deliver the best customer outcomes? This report is timely - in a forthcoming Consumer Green Paper, the government has an opportunity to address some of the inadequacies of ADR provision and consumer redress more generally.
The recommendations set out in this report bring together the academic expertise of the research team with Citizens Advice’s consumer knowledge. By building a picture of the UK’s current ADR landscape, its problems and its gaps, the research has led us to solutions for improving the use and outcomes of ADR for consumers. They set out how we can achieve a simpler, clearer and more accessible ADR landscape.
We would like to thank Queen Margaret University and the University of Westminster for their work on this research. We hope this report informs the ongoing development of dispute resolution in consumer markets.
James Plunkett - Director of Policy & Advocacy, Citizens Advice
This report is about the help available to consumers who have experienced a problem with a business that they have been unable to resolve on their own. Some of these problems end up in the small claims courts, but increasingly consumers can turn to Alternative Dispute Resolution (ADR) schemes. This report is about the UK’s current approach to ADR.
The report does 3 things. It provides an up-to-date map of ADR schemes available to consumers in the UK. It presents a detailed comparative assessment of a small selection of these schemes. And it sets out consumer insights drawn from interviews with consumers who have used ADR. The research presented in this report involved desk-based internet research, interviews with ADR schemes, and interviews with consumers.
The report comes at a crucial time. There have been longstanding criticisms of ADR provision for consumers and there is wide consensus that the system is incoherent and confusing. The current government has an opportunity to address some of these criticisms in a forthcoming Consumer Green Paper.
This is, therefore, an opportune time to be thinking about how to ensure that ADR meets consumers’ needs and serves their interests.
Three core messages arise from the research.
The ADR landscape is confusing for consumers. There are now more ADR schemes than ever. While this is not a problem in itself and has improved coverage, it has further added to the complexity facing consumers. And there remain significant gaps and overlaps. Where there are gaps, consumers are left without remedy. Where there are overlaps, consumers are left confused. The wide variety of ADR processes and inconsistent terminology are also a source of confusion.
The current ADR landscape is not designed with consumers’ needs in mind. Except where ADR is mandatory, businesses have the power both to decide whether to take part in ADR and, if so, which ADR scheme to use. In some sectors, multiple ADR schemes compete with each other. The result is that consumers’ needs are not being met. Often consumers do not know where to complain.
Improving ADR provision is hampered by a lack of good quality data. Simply describing the UK’s ADR landscape is a complex task. Information is not readily available and there is significant variation between ADR schemes in terms of transparency. Lack of good quality comparative data makes tackling the shortfalls in ADR provision more difficult. It also means that feedback loops that might improve business practice are less likely to be present. Overall, it means that ensuring consumer needs are met is difficult to assess and assure.
To address the areas for improvement identified in this report, we make 6 recommendations.
Recommendation 1: mandatory ADR should be extended across all consumer sectors
Significant gaps continue to exist where businesses choose not to sign up to an ADR scheme. The government should adopt the principle that participation in ADR should be mandatory across all consumer sectors, regardless of the sector involved or the value of the claims consumers are making. This should be monitored and reviewed if credible evidence emerges that the system is being abused. There are certain areas that may require special attention in relation to this recommendation including the private rented sector and consumer-to-consumer transactions.
Recommendation 2: in regulated sectors, ADR should be limited to 1 provider in each sector.
In regulated sectors, it is particularly important that the different actors (regulator, consumer advocate and ombudsman) work closely together. Therefore we recommend that there should be only 1 ADR provider per sector.
The potential benefits of competition in terms of raising standards can be maintained, for example by regularly inviting tenders for the contract to provide the ADR scheme.
Recommendation 3: in non-regulated sectors, BEIS should take steps to make the ADR landscape easier for consumers to navigate.
This can be done in a way that tackles gaps and overlaps in the ADR landscape at the same time as preserving standard-raising competition.
In non-regulated areas, should ADR become mandatory, we recommend that the Department for Business, Energy and Industrial Strategy (BEIS) work with industries and key stakeholders to make ADR more user-friendly. BEIS should consider whether having 1 ADR provider per sector is the right solution for consumers. As a minimum, there should be a single branded entry point for consumers wishing to make a complaint, with consumers shielded from ‘background’ competition.
Recommendation 4: ADR should be branded more consistently.
There is a wide variety of ADR types and processes available and a lack of clarity over terminology. In order to consolidate ADR as a key means by which consumer disputes are resolved, ADR needs to develop a clear, common, and well-known brand. Recent years have seen an increase in the number of ADR schemes branding themselves as ombudsman schemes. This may provide a starting point for a more consistently branded ADR offer.
Recommendation 5: ADR schemes should harmonise their practices wherever it is in the consumer interest to do so.
BEIS should work with the industry and key stakeholders to harmonise practice across ADR schemes. For example, consumers should be able to expect similar levels of procedural fairness and support in making a complaint regardless of the ADR scheme they are complaining to. The diversity of process and practice between ADR schemes is confusing for many consumers. While there is no need for identical processes to operate, without some common approaches and terminology, it will not be possible to develop common standards, benchmarks, and reporting requirements.
Recommendation 6: a single authoritative body should be tasked with setting common performance standards, benchmarks, and reporting requirement for all ADR schemes
While some positive developments in performance standards are already taking place, there is a need for more action. In particular, agreed benchmarks and common reporting requirements across all ADR schemes would make it easier to compare performance and raise standards. Having a single authoritative body with oversight of the ADR sector would also ensure that quality is maintained.
The research methods involved desk research, interviews, and a survey. The research took place in 3 phases and was supplemented by YouGov polling data.
Phase 1: mapping exercise. We undertook a desk-based mapping exercise in order to provide a snapshot of the current number and type of ADR schemes in the UK. The mapping exercise used publicly available information from ADR schemes’ websites. The mapping exercise also drew on previous analyses of ADR in the UK. Overall, the mapping exercise allowed us to provide an up-to-date map of the UK’s ADR landscape.
Phase 2: comparative analysis of selected ADR schemes. The second phase of the research involved comparing 11 ADR schemes using a framework developed in previous research commissioned by Citizens Advice. This framework features 8 criteria that allow ADR schemes to be compared. Our analysis was based on information publicly available on the websites of ADR schemes and follow-up telephone interviews with knowledgeable individuals within the schemes.
Phase 3: consumer experiences of using ADR schemes. The final phase of the research involved conducting 37 telephone interviews with consumers who had recently used an ADR scheme. The interviews sought to gather consumer perspectives on using ADR. These data provide an insight into consumer experiences and bring consumer perspectives to practitioners and policymakers.
Finally, as an additional aspect of the research, YouGov were commissioned to conduct a nationally representative survey of 2,109 people. The survey sought to obtain the views of the general public rather than those who had used ADR schemes (only 34 out of the 2,109 people surveyed had used ADR). The highlights of the survey are added throughout the report. A fuller summary of the methodology is available in Appendix B.
The research team would like to thank all the ADR schemes and consumers who took part in this research. Their assistance was much appreciated.
Queen Margaret University’s Consumer Dispute Resolution Centre and the University of Westminster’s School of Law have been commissioned by Citizens Advice to conduct a comparative analysis of alternative dispute resolution schemes (ADR schemes) in selected consumer markets.
This introduction sets out:
- definitions of key terms in the report;
- the aims and context of the research;
- a summary of the research design; and
- the structure of the report.
Definition of key terms
This section defines the key terms used in this report. The boxes below explain what is meant by “alternative dispute resolution”, what “alternative dispute resolution schemes” are, and the main types of “alternative dispute resolution processes” that exist.
What is alternative dispute resolution(ADR)?
Alternative dispute resolution (ADR) refers to alternative to litigation potentially available to resolve a dispute.ADR can involve adjudicative approaches where a binding decision is made on the dispute. It can also involve non-adjudicative approaches, where the aim is to obtain agreement between the parties. Some forms of ADR used to resolve disputes arising from a contract(or other relationship) between a consumer and trader. This is often referred to as 'consumer ADR'
What are the main types of ADR process?
Mediation: a confidential process where an independent third party helps the people in dispute reach an agreement.
Conciliation: similar to mediation, but the independent third party has more active role in suggesting what agreement should be reached.
Arbitration: arbitration is a binding process where an independent third party evaluates a dispute and decides how it should be resolved.
Adjudication: adjudication is like arbitration, but usually produces a decision that is only binding on business, not the consumer.
Ombudsman schemes: ombudsman scheme are independent third parties who consider complaints and usually combine fact-finding mediation, and adjudication.
The infographic over the page gives a snapshot of what consumers who have heard of the term ‘alternative dispute resolution’ think it means. This is the first of several points throughout the report where polling data is presented to give an insight into how consumers see the issues covered in this report.
What do consumers think ADR means
71% - of consumers thought that ADR was ' a means to avoid a dispute going to court.
55% - of consumers thought that ADR was a mediator
51% - of consumers thought that ADR was an impartial arbiter
Source: YouGov poll of 309 UK adults who had used or heard of ADR. Poll commissioned by Citizens Advice and conducted 14 and 15 March 2017
Research aims and context
The aims of the research were to provide:
- an up-to-date map of the UK’s ADR landscape;
- a comparative analysis of selected ADR schemes; and
- an insight into consumer experiences of using ADR schemes.
The research was designed to investigate whether the current ADR landscape works for consumers. In particular, Citizens Advice wanted to understand consumer expectations of ADR schemes and whether they deliver good outcomes for consumers. Citizens Advice also wanted to know whether there are differences between ADR schemes in terms of their effectiveness.
This research is timely. ADR schemes have an important role to play in protecting consumers. For many consumers, ADR schemes are the only realistic option to resolve their disputes. The introduction in 2015 of the European.
Union’s Directive on Consumer ADR (the Directive) has led to growth in the number ADR schemes and introduced some minimum quality requirements.
However, there are still concerns about the effectiveness of these new requirements 2 and the current consumer landscape for ADR remains confusing. 3 In particular, a wide variety of terminology and practices between ADR schemes, combined with a lack of consistency in approach, has a the potential to undermine consumer confidence.
Some of these issues could be addressed in the UK Government’s forthcoming Consumer Green Paper, due to be published in Spring 2017. Consequently, this research sheds light on a number of important topical matters for policy and practice in the UK’s ADR sector.
Summary of report structure
The rest of the report involves 5 sections:
- An analysis of the UK’s current ADR landscape;
- A comparison of available data relating to 11 ADR schemes;
- A summary of some consumer experiences of ADR;
- Our conclusions; and
- Our recommendations.