5. FINANCIAL LITERACY:
Recommendation 49: We welcome the steps being
taken by the Government, the Financial Services Authority and
the financial sector towards developing greater financial understanding
and awareness among consumers.
5.1 The Government recognizes that more needs
to be done to raise the levels of financial literacy and capability.
Consumers will only respond to trustworthy information if they
are properly equipped to interpret it. Raising levels of financial
capability is not just about educating, informing and advising
consumers, but giving them the skills and confidence they need
to put their finances on a sound footing - to avoid exploitative
credit, both legal and illegal.
5.2 It is widely acknowledged that to make a
real difference efforts to raise financial literacy must focus
on all the key life stages and events, from schools, the workplace
and retirement, to tackling debt and exclusion. We want consumers
to be able to act with confidence throughout their lives when
making financial decisions that are relevant to their circumstances
and needs. This is reflected in the emphasis the Government has
put into raising awareness of and education in financial matters
in its major reforms, for example, the Child Trust Fund and the
Department of Work and Pension's Informed Choice programme.
5.3 The Government fully supports the lead taken
by the FSA in developing a national Financial Capability Strategy.
This is a major piece of work - bringing together those in Government,
the financial services industry, employers, not-for-profit organisations,
consumer representatives and the media - to develop a national
strategy for financial education, information and generic advice.
5.4 The Government recognises the major role
it has to play in the creation and implementation of this national
strategy to increase financial capability. However, it is universally
accepted it will take some time before significant benefits manifest
themselves.
5.5 In conjunction with this, the OFT's consumer
education team, in close liaison with the FSA, is developing a
strategy - backed by evidence being developed by the OFT's research
into credit card information - to encourage a responsible and
informed approach to credit and borrowing. We agree that the credit
industry has a key part to play in this work.
5.6 The Government supports the Committee's recommendation
that the credit industry should test their products with groups
of consumers to ensure that they are transparent and understandable.
Education in relation to debt
Recommendation 51: Issues relating to consumer
debt need to be a specific part of the FSA's strategy of consumer
education.
5.7 The Government agrees that it is important
to provide support and advice to consumers to prevent them from
becoming over-indebted, but also to help them when the debt becomes
unmanageable. To achieve this, it is essential that consumers
are able to access timely and appropriate advice to allow them
to deal positively with their difficulties.
5.8 We are working with a number of providers
of free debt advice (including Citizens Advice, National Debtline,
Consumer Credit Counselling Services, Advice UK) and funders (from
the credit industry and across Government) to develop a unified
free debt advice service.
5.9 As the White Paper explains, the free debt
advice sector faces a number of challenges - of under-capacity,
lack of co-ordination and coherence in the advice given to consumers.
The Government intends to tackle these challenges.
5.10 Free debt advice providers are currently
working with funders and the Government to set-up a new telephone
gateway. This will refer consumers to appropriate free telephone
and face-to-face debt advice services. The gateway will create
coherence in advice provision and will be a step towards addressing
under-capacity. It will direct those in need of help to the most
suitable advice provider, while allowing advice providers to play
to their strengths and concentrate on their core clients.
5.11 Underpinning this, the Government and credit
industry sponsors are currently looking at ways of widening and
deepening funding contributions, through the development of long-term
funding strategies. .
Recommendation 52: We welcome the Government's
decision to put the Task Force on Over-indebtedness on a more
permanent footing. Consideration should be given to enhancing
the voice of consumer groups on the Task Force.
5.12 As mentioned above, the Government has set
up a cross Governmental Ministerial Group. This will ensure Government
initiatives are co-ordinated across Government and with work being
undertaken by voluntary sector organizations and credit providers.
The Ministerial Group will be supported by an Advisory Group.
The Advisory Group's membership is based upon the membership of
the Task Force on Tackling Over-indebtedness, but with a considerably
stronger consumer voice. It will have its first meeting on 26th
February and has representatives from the following organisations:
| Department for Trade and Industry
Department for Work and Pensions
Office of Fair Trading
Financial Service Authority
Citizens Advice
National Consumer Council
Money Advice Trust
Money Advice Scotland
Church Action on Poverty
Local Government Association
Bristol City Council
| Representative from Northern Ireland
(tbc)
Joseph Rowntree Foundation
Personal Finance Research Centre
British Bankers Association
Finance and Leasing Association
APACS
Consumer Credit Association
Council of Mortgage Lenders
Experian
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