8th June 2022

Cost-of-living pressure points

The spiralling cost of living has been at the forefront of many people’s minds over the past few months, and is set to remain so for some time. But what does it mean for consumer protection?


By Helen Nugent
Freelance writer for JTS
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Gaps in consumer protection are emerging, and we are worried about the potential for significantly increased levels of risk
We’ve got a perfect storm for scammers because we’ve got energy prices going through the roof and food prices are going up
It’s a very, very difficult situation for trading standards across the UK because we are stuck with a resource crisis without a doubt

Hardly a day seems to go by without more gloomy economic data and new fears over the impact of the cost-of-living crisis. As if the challenge of a worldwide pandemic wasn’t enough, now consumers and businesses must contend with soaring living costs and rising prices.

The past few months have seen a raft of unwelcome developments. According to the Office for National Statistics, almost 90% of British households experienced an increase in the cost of living in March, as food, energy and borrowing prices rose. In April, the cap on household energy bills went up by a staggering 54% and National Insurance contributions increased by 1.25 percentage points. A month earlier, inflation reached 7%, a rate not seen since 1992.

Meanwhile, fuel prices are at record highs. According to the New Economics Foundation, as many as 23.5 million people in the UK will be unable to afford the cost of living this year.

Not surprisingly, all of this has major implications for consumer protection, and will undoubtedly stretch the already slimmed-down resources that Trading Standards relies upon.

CTSI Chief Executive, John Herriman, says: “The cost-of-living crisis risks a significant rise in consumer detriment that the UK has not seen for decades. The COVID-19 pandemic warned us about the depths some will sink to through the scams that emerged out of it. For the unscrupulous, crises are opportunities to make a dishonest profit from the most vulnerable.

“Local Trading Standards services, working in partnership with other agencies, have continually risen to the challenges of protecting consumers, but this has become increasingly difficult after funding cuts of 50% over the past decade. Gaps in consumer protection are emerging, and while Trading Standards professionals are doing their utmost to protect the public, we are worried about the potential for significantly increased levels of risk.”

In April, ministers announced a number of reforms to consumer protection, including making it illegal to pay someone to write or host a fake review and stopping so-called ‘subscription traps’.

Herriman welcomes the proposals but warns that “we are sadly seeing a return of doorstep selling since pandemic restrictions were removed. We expect a rise in fake money-saving deals offered on energy prices and many other scams. The proposed reforms will address some of this but not all, and there is a need for effective funding at all levels of the consumer protection system, from national to local.”

Illegal money lending

In the meantime, officers are doing their utmost to tackle the issues that fall across their desks. Tony Quigley is Head of the England Illegal Money Lending Team (IMLT). As a unit, the IMLT has prosecuted illegal lenders for a variety of offences, from blackmail, intimidation and wounding to assault, kidnapping and even rape. Since the team’s inception, it has prosecuted more than 400 cases. Now it is seeing lenders moving to conventional social media platforms.

Quigley says: “The biggest reason for using an illegal lender is everyday expenses. It’s not chaotic lifestyles. Generally speaking, it’s something happening that sends you over the edge. As a result of that, you’ll see people use illegal lenders because it’s easy.

“We know there are three reasons why people use illegal lenders: the decision is instant, the cash is instant, and there’s no paperwork.”

Quigley says that the cost-of-living crisis may mean that people who wouldn’t normally resort to using an underground lender may fall into that category. But it could be some time before Trading Standards teams become aware of their situation.

“What we tend to find is that it takes people about two and a half years to report illegal lending. The reason behind that is because, initially, when you get a relationship with a lender that relationship comes across as a friendship. They’re all smiley and happy. Then you start to get into difficulties and that’s when you see the real side of them.”

A recent report by the Centre for Social Justice called ‘Swimming with Sharks’ used data from the IMLT to explore where and how illegal lending occurs. It estimated that more than one million people could be borrowing from one of these lenders. It also found that almost two-thirds of victims in 2021 earned less than £20,000 a year.

Quigley says he and his colleagues take an holistic approach to their work. “It’s not just the intervention which is the enforcement element, we also bring in support from local agencies to help and assist individuals in their need.

“One of the key things is that if you’ve got a debt to an illegal lender then it’s not enforceable in law so, once we intervene, in essence the debt is wiped out. They don’t continue because, ultimately, they’re under the spotlight now. What does happen, of course, is that it means the individual has got that money and it becomes controlled by them. So, they can start paying into their everyday household bills.”

Home energy

Of all the rises in domestic bills, the new energy price cap is one of the most severe. The increase in the cap means that, for a typical household paying by Direct Debit, the average annual energy bill has rocketed by £693 and now stands at £1,971. For prepay customers, that equates to a rise of £708, taking the yearly figure to £2,017.

Steve Playle, CTSI Lead Officer for Energy and Smart Meters, says: “That’s the situation we’re in now but it’s going to get worse because energy prices are predicted to go up even further in October when the price cap goes up again. You’ve got a choice: you either don’t heat your home or you try and install some measures which you are told will save the day. If you do install some additional measures then you need to think it through very carefully and think about any knock-on effects. There’s no quick fix for this issue.”

Needless to say, fraudsters are quick to take advantage of people struggling to pay the bills.

“We’ve got a perfect storm for scammers because we’ve got energy prices going through the roof and food prices are going up,” says Playle. “So, I would say that people are even more vulnerable to a knock on the door or a phone call from someone claiming that they can cut their energy consumption.”

While the National Trading Standards Intelligence Team keeps an eye on complaints, looking for early signs that someone is operating in an illegal way, resources aren’t commensurate with the scale of the challenge at both national and local level.

“There’s only a certain amount of work that Trading Standards can do. Unless we get to the stage where you ban cold-calling, either on the phone or by knocking on the door, then there’s always going to be someone out there who’s looking to make some money from other people’s misfortune and the fact that they can’t make ends meet,” says Playle.

So, what are the practical obstacles facing Trading Standards when it comes to protecting consumers?

“There are successes, but I know from my own experience that taking a prosecution case against a fraudulent company where there may be three or four defendants and 20 or 30 witnesses, those cases can take three or four years to get through court, cost hundreds of thousands of pounds in officer time and in court and legal fees, and Trading Standards doesn’t always get its costs back,” says Playle.

“I’m coming round to the view, and this is a personal view, that we should be doing far more disruption rather than doing prosecution.

“I’m a big fan of when you get that first complaint through where you think ‘this isn’t quite right, something needs to happen,’ you go and confront that trader straightaway and find out exactly what their business plan is and what they’re doing. Don’t let them carry on for 18 months and build up a head of complaints and then decide to take a prosecution because by then it’s too late. We need to be reactive and disruptive as quickly
as possible.”

Fraud and scams

As the cost of living climbs, many people will seek out ways of maximising their existing assets so they go as far as possible. In some cases, this is likely to involve resorting to online investment platforms – which in many cases are poorly considered get-rich-quick schemes.

City of London Trading Standards Officer Karen Tillett says that, as more people go online, investment fraud is a growing problem.

“The fraudsters seem to be moving away slightly from the approach of cold-calling and more into search optimisation. When you ask people, ‘how did you become aware of this,’ quite a few people we speak to say ‘oh, I searched Google and a particular company came up’ rather than they were called by someone. That lulls them into even more of a sense of security because they feel that they’ve found it,” says Tillett.

When it comes to addressing investment fraud, Operation Broadway has had an impact. The initiative from City of London Trading Standards and various other agencies raises awareness of scams and provides advice.

Fraud involving cryptocurrency is the most prolific type. In this situation, consumers tend to set up an account but are unaware that fraudsters are operating it on their behalf. At first, the account increases in value but, as it grows further, the scammers swoop in.

Tillett says: “Very few people have a true understanding of cryptocurrencies. Of course, the prevailing economic conditions feed into this with prices rising all the time, and returns on savings are practically nothing at the moment. People want to try and find ways to make their money go further… I think the cost-of-living crisis will increase financial fraud. People will get increasingly desperate to do more with their money.”

Tillett says that, at one time, most victims of investment fraud were older people. Now, because the fraudsters are using channels like WhatsApp and Instagram, younger people are being targeted. What can Trading Standards do to stamp down on this?

“The problem is that no one, either ourselves or the police, has got the resources to take all these people to court or even the ability to do so if they’re not UK-based or their website isn’t UK-based,” says Tillett. “But, as soon as a name comes up, we start an investigation to look into that company to see whether they’re making any false claims on their website and, if so, then try to get that website taken down. With the UK sites it’s generally possible but with some of the others, especially ones hosted in America, that can be more tricky.”

Tillett adds: “Our idea is to try and prevent other people from accessing these websites. We don’t wait for a huge number of complaints to come in. If there’s one or two where we find false claims then we will try and take that down. The thing that is most frustrating in terms of being in enforcement is that people do their homework after they’ve spent their money.”

Food safety

Of course, the climbing cost of living hasn’t just affected consumers, as David Pickering, CTSI Joint Lead Officer for Food Standards, explains: “Food businesses are facing rising costs. And the food supply chain is increasingly under pressure in a number of ways.

“It opens up the possibilities for some businesses who are less scrupulous to maybe look at substitution, look at cheaper ingredients, and not indicate to people that that’s what they are. So, as well as the quality issue you have also potentially got the consumer safety aspect of it because sometimes the substituted ingredients have allergy issues, and some allergies can have fatal consequences.”

He continues: “Unfortunately, the people who do this know what they’re doing and make it difficult for someone to tell that something has been changed. Certainly, with the substitution of lower quality and cheaper ingredients, unless there is some kind of allergy component that causes an immediate impact, it’s hard to tell. And even with people’s allergies, they don’t always show up straightaway.”

Pickering says that, in terms of safeguarding food safety, the role of Trading Standards is to use information and intelligence to look at businesses which are potentially using the cost-of-living crisis to gain an economic advantage but also to mislead consumers in what they’re selling. “It’s any food business that can influence what the food is,” he says.

“If you have got a food sampling budget, and that is an issue for local authorities, it’s thinking about how to best use that to help consumers.”

How important is the role of Trading Standards in protecting high standards of food safety? “It’s about getting that balance between not, in the eyes of some people, being overzealous but at the same time protecting consumers and protecting the legitimate businesses as well. It’s a double-edged thing where we want legitimate businesses to thrive but in order to do that we will have to do some regulatory work with legitimate businesses.”

Doorstep crime

Katherine Hart is CTSI Lead Officer for doorstep crime and scams. She thinks that the full implications of the rising cost of living won’t emerge until a couple of years down the line. “People are being pushed and squeezed now but I think we’ll see future consequences.”

Hart says that officers are facing a number of challenges, including scammers and rogue traders offering a quick, cheap fix – whether that’s home insulation, roof repairs, draught-proofing or myriad other things.

“We’ve still got the COVID scams that are out there but we’ve also got the energy scams. We have a problem where a lot of legitimate traders are tied up with a backlog from the last couple of years. While we as Trading Standards professionals encourage people to go and use a reputable tradesperson, we’re finding that those reputable traders are too busy. Therefore, consumers are cutting corners.

“So, the scams we’re seeing just now are very much about people offering quick fixes. What we’re also going to see are the online scams that will offer to save you money or offer a grant. So not only do you have physical doorstep crime, you’ve also got the online crime.

“I’ve seen a surge of energy texts saying that people can save money or government grants are available if you click on this link. At the end of the day, it’s banking data harvesting. It’s the same scams you see left, right and centre.”

Hart believes that different agencies need to work together to develop more consistent and regular messaging that won’t confuse the consumer. “It can be very difficult to strike that balance. At the same time, we cannot be frightened about taking enforcement action where appropriate. I think that’s the other thing we struggle with at the moment because of the resources.

“Scammers will try and exploit the fact that people want grants, they want help. I find it incredible how quickly they can react and how slow we are behind them sometimes. It’s not our fault, it’s just that the technology and the resources that the scammers have go far beyond the resources of local authorities.

“It’s a very, very difficult situation for Trading Standards across the UK because we are stuck with a resource crisis without a doubt. But we do try and keep consumers informed as much as we can. We use the tools that are available and we do, at this point in time, have a really good relationship with the media who come to us regularly.”

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