Speeches and Presentations



LCQ9: Consumption with pre-payment

Following is a written reply by the Acting Secretary for Commerce and Economic Development, Mr Gregory So, to a question by the Hon Andrew Leung in the Legislative Council today (May 4):

Question:

In July 2010, the Government published a consultation paper on enhancing protection for consumers against unfair trade practices, and the proposal of providing mandatory cooling-off periods for consumer transactions of timeshare rights or long-term holiday products and those concluded during unsolicited visits to consumers' homes or places of work is made in the paper. In January this year, the Government proposed to expand the scope of mandatory cooling-off arrangements to cover consumer transactions involving goods and/or services with a contract duration of not less than six months, and some members of the trade have expressed grave concern about this modification. In this connection, will the Government inform this Council:

(a) given that as revealed by the information provided by the authorities, 131 written submissions were received during the consultation period, among them, of the number of submissions which made the request for expanding the scope of mandatory cooling-off arrangements;

(b) of the Government's rationale for the proposed expansion of the scope to be covered by mandatory cooling-off arrangements; whether it has consulted the trade on the new scope to be covered;

(c) whether it knows the number of complaints involving the use of pre-payment mode of consumer transactions in the following types of goods/services in the past two years and in the first quarter of this year (set out in Table 1 of Annex I); and

(d) whether it knows the prepaid amounts involved in the complaints in (c) (set out in Table 2 of Annex I)?

Reply:

President,

(a) Among the 131 public submissions received by the Government, 25 suggested that the scope of transactions to be covered by a cooling-off arrangement be expanded, details are set out in Table 1 of Annex II.

(b) Views are polarised on whether there should be a mandatory cooling-off period and on the scope of application, if any. There are views that cooling-off will induce moral hazards, encourage risk-taking by consumers and as a result mean additional costs for business, which may translate into higher prices for consumers. On the other hand, there is an overwhelming call for expansion of the scope of coverage. A cooling-off period allows consumers to reconsider their decisions, after consulting third parties where necessary, and free from any undue influence that may have been exerted during the course of the transaction. Moreover, the availability of a cooling-off period can also add to deter unscrupulous acts like aggressive practices in the first place.

After carefully examined the views of different sectors of the community, we consider that an expansion of the scope of a mandatory cooling-off arrangement is suitable. We propose that a mandatory cooling-off period be imposed on contracts involving goods and/or services with a duration of not less than six months. As regards consumer transactions concluded during unsolicited visits to consumers’ homes and places of work covered by our original proposal, we maintain that these transactions should be subject to a cooling-off arrangement irrespective of their contract duration. On January 20 this year, we put forth the above revised proposals.

In preparation of drafting the legal provisions, we are liaising with business associations and industry and trade organisations etc. so as to gauge their views on the details of the proposals. From what we have gathered so far, we understand that there are concerns about the operational arrangements under the revised proposals, including the financial and refund arrangements involved, administration fees, and arrangements for waiving or curtailing the cooling-off period. We will consider the views of different sectors and examine the details of the arrangements carefully.

(c) The complaints received by the Consumer Council are generally categorised by major industries. The Council does not keep separate categories on "general merchandise" and "catering (including cake/soup coupons)". The complaint figures categorised by "beauty care", "fitness and/or yoga centre", "travel club membership", "telecommunications" and "wedding/banquet" are set out in Table 2 of Annex II.

To reply to the Member's question, the Consumer Council has examined the case files categorised by the industries set out in Table 2. The number of complaint cases involving matters under the pre-payment mode of consumer transactions is set out in Table 3 of Annex II.

(d) The prepaid amounts (in $'000) involved in the complaints referred to in Annex II Table 3 of part (c) of the reply are set out in Table 4 of Annex II.

Wednesday, May 4, 2011

Annex I PDF

Annex II PDF