Select Committee on Treasury Second Special Report


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


Joseph Rowntree Foundation

Personal Finance Research Centre

British Bankers Association

Finance and Leasing Association


Consumer Credit Association

Council of Mortgage Lenders


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