Memorandum submitted by Citizens Advice
EXECUTIVE SUMMARY
— Citizens Advice welcomes the opportunity
to submit evidence to the Treasury Select Committee's inquiry
into financial inclusion. We are strong supporters of efforts
by government and the financial and voluntary sectors to improve
financial inclusion, since many of our clients are on low incomes
or benefits, or are disadvantaged in some way.
Access to banking
— Citizens Advice is appreciative of
efforts made by the banking industry to widen access to banking,
yet many CAB clients still find it difficult to open a basic bank
account for a number of reasons including having insufficient
evidence of their identity and address, banks selling inappropriate
accounts instead and unnecessary use of credit scoring.
— It is not enough to tackle problems
opening accounts. To ensure financial inclusion, problems operating
accounts also need to be addressed, including banks' use of their
right of set-off and administration charges for unpaid direct
debits and overdrafts.
— Charges for obtaining cash, particularly
in small amounts, seem excessive and unfair and disproportionately
penalise families who have low weekly incomes and who cannot afford
to withdraw larger sums. Citizens Advice believes there should
be wider access to transactions via the network of post offices.
Access to credit
— Credit use by people on low incomes
is extensive but CAB evidence calls into question the traditionally
held view that people on low incomes can only access expensive
sub-prime sources of credit. Many of our clients on low incomes
can access both mainstream and sub-prime sources of credit.
— The suitability of a loan product
is as important as the price of credit in determining affordability.
There are cases of lending by both mainstream and sub-prime lenders
where it is not clear that the borrower would have been able to
meet repayments from the outset of the loan.
— CAB evidence suggests that borrowers
on low incomes do not use price as the basis for their lending
decisions, rather they often use credit as a survival strategy
to make ends meet. If this is the case, providing low cost alternative
credit might not be sufficient to significantly affect the affordability
of credit use.
— CAB evidence shows that it is not
just the interest rates on home credit products that cause problems.
High APR rates exist in a range of credit products, including
loans secured against vehicles, hire purchase agreements, and
cheque cashing and holding facilities.
— Problems with secured credit must
be addressed in any financial inclusion strategy. People on low
incomes or with impaired credit histories can only release money
locked up in their home by taking out expensive secured loans.
— The social fund has a key role to
play in extending access to affordable credit. However eligibility
for budgeting loans and community care grants is restricted to
people in receipt of certain means-tested benefits.
— Citizens Advice has concerns about
the government proposal to extend the DWP third party deductions
scheme to debts to third sector lenders. Our concerns include
the viability, fairness and cost of the scheme.
Financial education and access to financial advice
— People who are financially excluded
tend to have lower incomes and thus it is arguable that the ability
to deal with simple financial matters such as borrowing and budgeting
is even more critical where one has limited financial flexibility.
Equipping those people who are financially excluded and have limited
practical experience of choosing and using financial products
to do so should be integral to an effective financial inclusion
strategy.
— Activities to address financial capability
of adults are likely to involve significant resources. Citizens
Advice believes that there are significant gains to the economy,
the public sector and financial firms and markets from investment
in creating more confident consumers.
— We think that a simple solution to
complexity in financial products and literature would be for all
firms, and government, to financial literacy proof all forms,
leaflets and letters.
— Access to financial advice for people
on low incomes is important and currently there is a gap in provision.
The Citizens Advice service is looking at providing generic financial
advice for people on low incomes.
Incentives and barriers to savings
— The most obvious barrier to saving
for people in poverty is that their incomes are too small to sustain
anything other than essential spending. Capital limits and tariff
income rules for means-tested benefits do not encourage saving.
The role of the Government and other bodies in
promoting financial inclusion
— Citizens Advice believes that tackling
financial inclusion will only happen with action by government,
the public sector, financial firms in all relevant markets, regulators
and a wide range of bodies and organisations.
— Citizens Advice warmly welcomes the
Government's renewed strategy to address aspects of financial
exclusion, but believes that a longer-term strategy is needed
to which all engaged partners can work.
— In addition, the policy agenda described
in the Government's financial inclusion strategy needs expanding
to clearly encompass: a reform of the social fund; access to a
full range of financial services including insurance, mortgage
borrowing, savings and pensions; action to improve financial capability
of consumers experiencing financial exclusion and; action to identify
and promote the business case for financial inclusion to UK plc.
Using financial inclusion to combat poverty and
reduce barriers to employment
— CAB evidence shows that financial
exclusion presents significant barriers to employment. Citizens
Advice considers that tackling financial exclusion could help
with government priority policies including reducing child and
pensioner poverty and welfare to work.
1. INTRODUCTION
1.1 Citizens Advice is the national co-ordinating
body for Citizens Advice Bureaux in England and Wales. We co-ordinate
the largest independent network of free advice centres in Europe,
providing advice from over 3,000 outlets, ranging from GPs' surgeries,
hospitals, community centres, county courts and magistrates courts.
In 2004-05 the CAB service dealt with 5.2 million new enquiries.
Of these enquiries nearly 1.2 million were debt or finance-related.
1.2 The CAB service has two equal aims:
— to ensure that individuals do not
suffer through lack of knowledge of their rights and responsibilities
or of the services available to them, or through an inability
to express their needs effectively;
— and equally, to exercise a responsible
influence on the development of social policies and services,
both locally and nationally.
1.3 Citizens Advice welcomes the opportunity
to submit evidence to the Treasury Select Committee's inquiry
into financial inclusion. We are strong supporters of efforts
to raise financial inclusion, since many of our clients are on
low incomes or benefits, or are disadvantaged in some way. For
example, research by MORI for Citizens Advice found that CAB users
tend to be in social grades DE and the unemployed.[72]
1.4 Our comments cover a wide range of issues
relevant to financial inclusion. The structure of our submission
mirrors the main headings detailed in the announcement of the
inquiry, namely:
— access to banking services;
— access to affordable credit;
— financial education and access to
financial advice;
— incentives and barriers to saving
for people on below average incomes;
— the role of the Government, the Financial
Services Authority and other bodies and organisations in promoting
financial inclusion;
— the benefits of financial inclusion
and the extent to which financial inclusion measures can contribute
to combating poverty and reducing barriers to employment.
1.5 We have not provided specific details
of the many financial inclusion projects being carried out by
CABx in this submission but would be pleased to do so if requested.
1.6 Citizens Advice would like to take this
opportunity to extend an invitation to the Treasury Select Committee
to visit a local financial inclusion project as part of this inquiry.
2. ACCESS TO
BANKING SERVICES
2.1 A bank account is integral to efforts
to achieve financial inclusion as it acts as a gateway to other
financial products and services. Without a bank account individuals
can be excluded from an array of financial services. For example
those who do not have bank accounts—the "unbanked"—face
higher costs on simple transactions like cashing cheques or paying
for their fuel bills via a pre-payment meter, and find it more
difficult and costly to purchase other financial products such
as insurance or credit.
2.2 In 2002-03 around 8% of households in
Britain were without access to any kind of bank account. This
equates to one in 12 households or approximately 2.8 million adults.[73]
In Scotland, where incomes are lower than the rest of the UK and
the Savings Gateway does not operate, 11% of people are without
a bank account.
2.3 To tackle the problem of the unbanked,
the government announced that it was working together with the
banks towards the goal of halving the number of adults in households
without a bank account—and to have made significant progress
in that direction within two years.[74]
2.4 Progress has been made by the banking
industry in extending access to bank accounts, with over 1.5 million
basic bank accounts having been opened since April 2003.[75]
However, CAB evidence shows that many clients are still finding
it difficult to open basic bank accounts, with the most vulnerable
people frequently finding that there are obstacles placed in their
way when they attempt to do so. A solution to this is pressing,
as the government intends to roll out reforms to housing benefit,
which include payment of housing benefit into bank accounts. Our
report Banking benefits, explores the problems that many CAB clients
experience when trying to open and operate a bank account, and
concludes that these problems threaten the stated goal of halving
the number of people without a bank account.
Problems encountered opening bank accounts
2.5 Our report shows that opening a bank
account continues to be difficult for many people. Between April
and September 2005, 73 bureaux submitting detailed statistics
to Citizens Advice reported that over a third of their enquiries
about bank accounts—and by far the largest number—related
to problems with access.
2.6 The main problems CABx clients encounter
when trying to open a basic bank account include:
— problems proving identity and address
due to lack of acceptable documentation;
— the failure of banks to promote basic
accounts;
— banks attempts to sell other accounts;
— lack of access to bank accounts for
people in debt or bankrupts;
— delays in opening basic bank accounts;
and
— upgrading basic bank accounts when
this is not in their best interests.
2.7 The following evidence from bureaux
highlights some of these issues:
A CAB in Sussex reported that a single man in
receipt of income support and housing benefit was unable to open
a bank account because the local banks were not willing to accept
a letter of entitlement to housing benefit as proof of identity.
As a result the client was unable to cash his housing benefit
cheques.
The same CAB was so concerned at the problems
their clients were facing in this regard that they organised a
meeting with representatives from local banks. The issues discussed
covered staff training, basic bank literature, appropriate selling
of products, the length of time to open an account, possible systems
for copying original ID documents and the need for a single list
of acceptable documents to prove identity and address. The CAB
proposed that one way of safely addressing this problem would
be for banks to accept housing benefit notification letters from
the local council as proof of address, in the same way that they
can (in theory) accept letters from central government bodies
(eg DWP benefits offices or JobCentre Plus offices). However,
although delegates agreed the meeting had been useful, only two
local banks subsequently accepted housing benefit letters as proof
of address.
A CAB in Nottinghamshire reported that a client
with schizophrenia and in receipt of income support and disability
living allowance went to a bank to open an account in order to
receive benefit payments from the DWP. The client was granted
an account, but was also offered a £2,000 loan, a £600
overdraft and use of a credit card. The client is now in financial
difficulties.
2.8 It is only by re-thinking how basic
bank accounts fit with banks' other objectives that a major change
in their approach to the provision of basic bank accounts can
be expected. To meet the goal of halving the number of unbanked,
banks must be given a real reason to promote basic bank accounts.
Citizens Advice therefore considers that the Financial Inclusion
Task Force should commission a report to outline the business
case for banks to actively offer bank accounts to people on low
incomes.
2.9 More immediately, we also consider that
a number of simple changes could make it much easier for people
to open bank accounts:
— Full credit scoring should not be
used to determine access to a basic account.
— People opening a basic account rather
than a current account should receive the same level of service
on the time taken to open an account.
— Banks should make publicly available
information about the documents that will be accepted as proof
of identity to open an account.
Problems encountered using bank accounts
2.10 Making the process of opening a bank
account more simple and straightforward is a necessary condition
for moving towards financial inclusion but is not the only requirement—the
banking products on offer also need to be appropriate to meet
customers' needs. CAB clients experience problems operating their
bank accounts due to certain features of bank accounts, including:
— Banks appropriating money in accounts
to pay other debts owed to them.
— The timing of direct debits, standing
orders and administration charges.
2.11 The following cases demonstrate the
impact of these practices:
A Humberside CAB reported that a lone parent
who was expecting another baby, was shocked to discover that £400
of her social fund maternity grant had been transferred out of
her bank account to pay other debts to the bank, leaving her with
about £30 to live on. The bank told her that even though
they had accepted her offer of repayment towards the debt, they
would check her account regularly and take any money they found
in it. As a result the client could not buy anything for her unborn
child.
A West Midlands CAB reported that a client was
charged over £100 in unpaid direct debit fees because direct
debits were debited from his account before his tax credit entitlement
was paid in.
2.12 Problems operating accounts can have
a significant detrimental impact on efforts to promote financial
inclusion. If people have negative experiences operating a bank
account, or find that they are being financially penalised for
opening an account, they may choose to opt out of mainstream financial
services. Citizens Advice recommends that:
— Banks should not exercise their right
of set off from basic bank accounts. This is because the customer
may have other payments to make which are of greater priority
such as rent, mortgage, council tax or fuel.
— Banks should refund any money they
have appropriated through the right of set-off to a customer who
can demonstrate that these actions have left them in financial
difficulty.
— The Office of Fair Trading's (OFT)
investigation of "unfair" credit card charges[76]
should be extended to examine charges for failed direct debits
levied on basic bank accounts.
— All banks should offer a buffer zone
of £10 on their basic accounts.
— All banks should offer budgeting
advice when setting up accounts.
Access to cash withdrawals
2.13 Citizens Advice has identified the
growth of charges for use of cash machines as an additional risk
to financial inclusion. Charges for obtaining cash, particularly
in small amounts, seem excessive and unfair and disproportionately
penalise families who have weekly low incomes (ie those on benefits
or in the low pay economy) who cannot afford to withdraw money
in larger sums. For example:
A CAB in Derbyshire reported that a disabled
woman in receipt of benefits lived in a small village with no
free cash machine. There were two fee-charging machines, one charging
£1.50 per transaction and the other £1.30. As a result
the client was living on a reduced income, when she needed every
penny to make ends meet.
A CAB in Kent reported that one of their multiple
debt clients lived in a village outside the town where the only
cash machine, which charged £1.50 per transaction was situated
in the local post office. As the client needed to budget very
carefully due to her debts, she only withdrew small amounts, paying
a significant fee each time, which could have been better used
on her essential expenditure.
2.14 We welcome the recent changes to the
LINK Code of Practice to ensure all ATMs provide clearer information
to consumers on charges,[77]
and hope to work with LINK later this year to check cash machine
operators are complying with the new requirements. However, we
would like to see further changes to make it very clear which
machines charge. We agree with Nationwide Building Society that
there should be a clear distinction between fee-charging and free
cash machines by means of red and green signs.
2.15 To extend free access to cash, Citizens
Advice believes that all current account holders should be able
to withdraw cash over the counter at Post Offices.[78]
If individual banks remain reluctant to offer this facility, we
consider that Post Office Ltd should become a member of LINK for
this to happen. Enabling all bank customers to withdraw their
money from the post office would provide greater convenience for
bank customers. It would also potentially throw a lifeline to
rural post offices that have seen a major reduction in their business
following the introduction of payment of benefit into bank accounts,
and who are threatened with finding alternative revenue streams
when government subsidy is scheduled to end in 2008.
3. ACCESS TO
AFFORDABLE CREDIT
3.1 In this section we look at access to
commercial sources of credit for people on low incomes, the social
fund and the role of the DWP third party deduction scheme in extending
access to affordable credit.
Access to commercial sources of credit for people
on low incomes
3.2 Our evidence calls into question the
traditionally held view that people on low incomes can only access
expensive sub-prime sources of credit. We consider that there
is a complex relationship between low income, exclusion from mainstream
credit and use of more expensive sub prime credit products. Our
evidence shows that there are the following three broad categories
of borrowers:
Excluded from mainstream credit and using alternative
lenders
3.3 There is a considerable amount of research
showing how people in receipt of low incomes and/or with a poor
credit history use alternative higher cost lenders rather than
seeking credit from mainstream high street providers, and this
is strongly reflected in CAB evidence:
A CAB in Surrey reports the case of a disabled
woman who was a single parent of 3 children, two of whom had special
needs. She was in receipt of benefits and had taken out unsecured
loans charged at an APR of 77%. She told the CAB that she could
not get credit elsewhere as she had a poor credit record due to
debts run up by her ex-husband.
Low income or poor credit history but able to
access mainstream credit with few checks as to the suitability
of the product offered
3.4 Not all people in receipt of low incomes
or with poor credit histories (or current debt problems) are excluded
from mainstream credit. A further and much larger body of CAB
evidence shows how people in these circumstances are frequently
offered credit by mainstream lenders but in a way that takes little
or no account of the suitability of the product for borrowers'
needs or for their ability to keep up with repayments of the credit
offered. Credit can include personal loans, credit cards, store
cards and overdrafts as the following case shows.
A CAB in County Durham reports the case of a
single woman who was the guardian and carer of her disabled young
grandson. She was in receipt of income support, housing and council
tax benefit and disability living allowance in respect of her
grandson. She had been living on means tested benefits for many
years and had previously received debt advice from the bureau.
She returned for further help with new debts from store cards,
credit cards and an overdraft from a high street bank. She had
recently been granted a loan of £3,500 with this bank even
though she already had an overdraft and significant credit card
balance with them. The bank should have been aware of her income
status as her benefits were paid into her current account with
them.
Borrowers using both mainstream and alternative
credit products
3.5 Survey data compiled by NOP World for
the Competition Commission inquiry into the home credit market
showed a significant number of the respondents using mainstream
credit products at the same time as borrowing from home credit,
for instance 14%were using credit cards as a further means of
borrowing[79].
It is notable that this simultaneous credit use was reported both
by respondents with full service bank accounts and those with
basic bank accounts or Post Office card accounts (albeit a lower
proportion).
A CAB in Worcestershire reports the case of
a disabled woman who visited them for debt advice. Her income
came from a state retirement pension, pension credit and disability
living allowance and she lived in rented accommodation. She had
22 credit debts totalling over £24,000. This included: nine
catalogues, five store cards, three mainstream credit cards, three
sub-prime credit cards, one near prime mainstream loan and one
loan from a home credit provider.
3.6 This evidence suggests that while a
credit divide exists, its boundaries are not clearly defined by
receipt of a low income or poor credit histories alone. While
this evidence gives no clear indication of why credit exclusion
seems to operate in such a manner, it does allow us to make the
following observations:
— Credit use by people on low incomes
is not necessarily modest, with relatively large borrowing from
both mainstream and alternative sources in some cases. It is the
ability to repay credit, rather than the need to finance large
or ongoing purchases that is modest.
— With both mainstream and alternative
lending, the suitability of the loan product is as important as
the price of credit in determining affordability. There are cases
of lending by both mainstream and sub-prime lenders where it is
not clear that the borrower would have been able to meet repayments
from the outset of the loan.
3.7 The current credit information regime
might itself play a part in creating an insider-outsider credit
market. CAB evidence suggests that borrowers often try to avoid
default (and hence stay inside the mainstream system) by using
one credit product to pay another. Lenders play a similar game
through offering consolidation lending to borrowers rather than
forbearance. Again such lending appears to be unsuitable for the
borrowers needs in many cases reported by CABx.
3.8 Our evidence also suggests that low
income borrowers might not use price as the basis for their lending
decisions. In some of the cases borrowers seem to be taking what
comes their way—a kind of credit survival strategy for persistent
low income and dependency on credit to make ends meet. If this
is the case, providing low cost alternative credit might not be
sufficient to significantly affect the affordability of credit
use. A wider strategy of financial inclusion will be necessary.
3.9 CAB evidence shows how mainstream credit
often levies a large cost on borrowers' financial difficulties.
This is not necessarily the case in all forms of alternative credit.
Affordable credit strategies must do more than attempt to integrate
low income borrowers to the mainstream; mainstream credit providers
need to be better integrated to the needs of financially excluded
borrowers.
CAB evidence on alternative credit
3.10 A good deal of the recent focus on
problems with high cost alternative credit has fallen on interest
rates generally and the home credit sector in particular. However,
this provides an incomplete picture of the problems with alternative
credit reported by CAB clients. High APR rates exist in a range
of credit products, including loans secured against vehicles,
and cheque cashing and holding facilities as well as doorstep
personal loans.
A Shropshire CAB saw a client who had been persuaded
to take out a loan secured against his car. The client met the
lender in a car park at night. He was desperate for the money
so agreed to hand over his car log book as security for a loan
of £1,000. The APR on the loan is 323%.
A CAB in the South of England was visited by
a woman who was a single parent in receipt of income support.
She was also receiving support and medication for long-term mental
health issues. She was struggling with debts and her income support
was being swallowed up by her overdraft. In order to pay for groceries
for her and her son she was writing post-dated cheques with a
cheque cashing company. She had a credit agreement with them and
the APR was 352.34%. She has now run into further difficulties
because her cheque bounced because of her overdrawn account. The
cheque cashing company kept presenting the cheque which meant
that she kept on incurring additional charges as well as the £5
charges that the cashing company issue every time a cheque fails
to clear.
3.11 This last case shows how it is not
just the headline APR that can make credit expensive as additional
charges following default or other events in the life of the agreement
can have a huge effect on the amount people pay for credit. Given
that a recent DTI report showed that people in receipt of incomes
below £9,500 are disproportionately likely to satisfy a range
of over-indebtedness indicators, it is likely that these costs
will fall most heavily on the people most vulnerable to financial
exclusion[80].
CAB evidence shows how additional charges can contribute to spiralling
indebtedness.
A CAB in South East Wales saw a woman who had
bought an item from a catalogue about three year ago for £8.99.
Due to ill health she entered a residential care home for three
months, which caused a delay in her paying the bill with her credit
card. The catalogue company added administration charges and sent
the account to a debt collector who presented the woman with a
bill for £337.
3.12 CAB clients also report problems with
creditors in the sub-prime hire purchase sector. The headline
APR rates are lower, but agreements tend to be of longer duration
and are secured by the lender's power to take repossession of
the goods. In many of the cases reported, the borrower has entered
into high cost credit to purchase basic household goods.
A CAB in South London reports the case of a
woman who had signed a HP agreement for a cooker. She had literacy
difficulties but could sign her own name. She thought she was
buying a new cooker but it turned out to be a used cooker. She
also thought the agreement was for a year but it was actually
for three years with an interest rate of 42%. When she realized
this she tried to get the agreement changed but the company refused.
A specialist CAB debt advice service in Yorkshire
saw a client who had purchased a second hand sofa on a hire purchase
agreement. The cash price was £644.77 and the credit charge
was £251.23. The client was given no option to opt out of
the "optional service cover" and "damage liability
cover". This brought the total amount payable over 140 weeks
to £1,265.60. The client was unable to meet the weekly payment
out of his retirement pension.
3.13 In addition, CAB clients in financial
difficulties have reported facing excessively aggressive and in
some cases illegal action by lenders seeking to force payments
and recover goods subject to hire purchase agreements.
A CAB in the West Midlands advised a 58 year
old woman who had taken out an HP agreement on a three piece suite.
She had been a customer of the lender for eight years and never
had a problem, but her husband lost his job and she could no longer
afford the full repayments. The lender refused to negotiate and
threatened to repossess the goods, although they would have required
a court order to do so as the woman had paid over a third of the
agreement price. However the lender began to harass the woman
and its employees were caught trying to gain access to her house
by climbing through the living room window even though this was
clearly an illegal act.
Secured lending
3.14 CAB evidence shows how people on low
incomes or with impaired credit histories also have problems with
accessing affordable secured credit both for home purchase and
for equity release. The credit offered is often charged above
mainstream mortgage rates, and in some cases the contractual repayments
have risen sharply after an initial period catching the borrower
by surprise and causing financial difficulties. Borrowers also
report suffering harsh and intransigent collection practices when
they have fallen into financial difficulties.
A CAB in Nottinghamshire was visited by a man
who had taken out a mortgage with a sub-prime lender several years
ago. The interest rate was initially set at 7%, but rose to 10%
shortly afterwards. This increased his contractual repayment to
a level he could not afford. On falling into arrears the lender
added another £65 to the debt as an administration fee. The
man made enquiries about changing to a different mortgage but
was told that high redemption fees would add to his financial
difficulties. He told the bureau that he hadn't approached a mainstream
lender as he had a county court judgment and thought that they
would not consider him.
3.15 The government has stated its policy
intention to extend homeownership to more people on low incomes.
While Citizens Advice supports measures to help people achieve
their choice of affordable housing, we are concerned that some
borrowers may see their home ownership dreams founder against
expensive credit and bad practices by their lenders. We are not
convinced that access to affordable mortgage credit or protection
against the threat of possession for arrears is sufficient for
this group of borrowers.
Recommendations and conclusions on access to commercial
sources of credit
3.16 Affordable credit must be fair credit:
Interest rates, charges and lenders' practices all play a part
in determining the cost of credit for borrowers. In too many cases
reported by CAB clients one or more of these factors seems to
work to the borrower's detriment in a manner that can be described
as unfair. Therefore Citizens Advice welcomes the unfair credit
relationships test in the Consumer Credit Bill that will replace
the current inadequate extortionate credit rules. We believe that
the unfair credit provisions can play a central role in increasing
the affordability of credit for low income borrowers in particular
but this will depend on how the new rules are implemented.
3.17 The government has suggested that the
transitional period between commencement of clause 20 of the Consumer
Credit Bill and the unfair credit provisions coming into force
might be extended for some classes of agreement. We are concerned
that this would shield ongoing bad practices from scrutiny and
undermine the affordable credit impact of the Consumer Credit
Bill.
3.18 The new powers contained in the Consumer
Credit Bill to give the Office of Fair Trading additional powers
to tackle unfair practices by consumer credit license holders
are welcome. Currently the OFT has very limited powers to tackle
unscrupulous lending and debt collection practices. However the
OFT has often been unwilling or unable in the past to use its
existing powers. Citizens Advice considers it is vital that the
OFT be prepared to use its licensing and injunctive powers to
both address persistent bad practices and to establish minimum
standards of conduct for lenders.
3.19 The government has stated that the
unfair credit provisions include a duty on lenders to lend responsibly.
Citizens Advice believes that the suitability of credit products
for a borrower's needs should be central to this duty. Lenders
should therefore ensure that their credit products are affordable,
both in terms of a borrower's capacity to meet contractual repayments
and the cost structure of the product, particularly with respect
to default and administration charges.
3.20 Alternative credit sources must not
repeat the same problem: It is important that third sector lenders
properly understand the environment they operate in. For instance,
we recently received promotional material from a community finance
project offering loans at over 20% APR for the purpose of clearing
other debts where the examples given were non-interest bearing,
or would likely carry interest at a lower rate. Such short term
solutions can potentially leave borrowers in a worse position
in the long term. Third sector lending must be connected to wider
advice and financial capability strategies or debt problems might
actually be exacerbated by inappropriate lending.
3.21 Problems with secured credit must be
addressed in any strategy to tackle financial exclusion. While
homeowners have seen their wealth hugely increase with rising
house prices, people in receipt of low incomes or with impaired
credit histories can only realise this asset by taking out expensive
secured loans. With CAB advisers now reporting increased numbers
of arrears cases and possession actions relating to secured lending
(much of which is sub-prime or near prime), we believe that access
to affordable secured credit is also a key issue for a financial
inclusion strategy to consider.
Social Fund
3.22 The government is considering what
a social fund for the future might look like, and wants to explore
ways in which the social fund could do more, both in the context
of improving financial inclusion and promoting independence.
3.23 Citizens Advice would like to see much
wider eligibility for social fund loans and grants. Budgeting
loans and community care grants are currently restricted to people
in receipt of income support, income-based jobseekers allowance
or pension credit. Yet people getting incapacity benefit, who
may have been ill for a long time and whose incomes may be the
same as people on income support, cannot apply for a loan or a
grant. People getting child tax credit are also ineligible. There
is a case for reviewing whether anyone on a low income should
have access to loans and grants from the social fund.
A Surrey CAB saw a client who is married with
two young children. He was made bankrupt and as a result he lost
his house and sold most of his possessions to clear his debts.
He is currently being housed along with his family in temporary
council accommodation. Meanwhile, he, his wife and two children
all sleep in the same bed. He would like to apply for a community
care grant so that he can buy beds for his children. He is reluctant
to apply for a crisis loan as he is worried about getting into
debt again. However, he is on incapacity benefit which is not
a qualifying benefit.
A Somerset CAB saw a young woman with a two
year old child who had just been offered a house after many months
living in a women's refuge. She had had to flee her home quickly
and was advised by the police that it was unsafe for her to return.
The client left her abusive situation with debt and was loathe
to take more on by applying for a crisis loan. She needed money
to furnish her flat but because she was working, part-time and
for a low wage, she was considered ineligible for a community
care grant.
3.24 We are concerned that the size of social
fund budgets is too small to meet the needs it sets out to deal
with. Many people in genuine need are refused help purely because
of priority criteria which can vary depending on the amount remaining
in local budgets.
3.25 The social fund remains poorly focussed.
Crisis loans are often paid to people who are entitled to Income
Support and other benefits. The Public Accounts Committee reported,
in November 2005, that 40% crisis loan spend went on "alignment
payments", to people without money who have made a claim
for benefits. Our evidence suggests that this will have increased
further, as a result of extensive delays to benefit payments following
the introduction of Jobcentre Plus' new system for claiming benefits.
This money is therefore not available for other people in need
of an emergency loan. Benefit applications should not be subject
to (often lengthy) delays, but we recommend that there should
be a fast-track scheme to provide interim payments to people who
appear to have a valid claim for benefit.
3.26 Over-reliance on telephone applications
at Jobcentre Plus has made matters worse, with people being told
they cannot make any claim in person but must use a phone service—which
has frequently been inaccessible. The current system leaves vulnerable
people exposed.
A homeless client had no money and asked the
bureau for help in making a phone call for a crisis loan. It took
10 minutes to get through and then he was cut off. Eventually,
the client walked the eight miles to the nearest Jobcentre Plus
office. He returned to the bureau to say that he had been advised
to stand outside a certain phone box at 11am and he would receive
a decision by telephone. He waited 25 minutes but no call came,
and he returned to the bureau in desperation.
Third party deductions scheme
3.27 The facility for direct deductions
from benefit for debts and ongoing commitments has been and remains
essential for many benefit claimants. It allows them to prevent
repossession and homelessness, safeguard supplies and enable them
to pay, and their creditor to receive regular, if small, payments
towards their debts and avoid further debt recovery action and
transaction costs such as court fees.
3.28 In the 2004 Pre-Budget Report, HM Treasury
proposed to extend the DWP's third party deduction scheme to debts
to private sector and third sector lenders where normal repayment
arrangements have broken down.[81]
This is one of a package of measures aimed at improving access
to affordable sources of credit for people on low incomes. Access
to the third party deduction scheme could reassure lenders that
the money they lend will be repaid, and encourage them to lend
to more people on low incomes at better rates of interest. It
could also reassure the consumer that if they do fall into arrears
they can avoid formal debt recovery action and costs via the scheme.
3.29 However, we have a number of concerns
about these proposals. Firstly, the scheme may not necessarily
ensure that lenders will get their money back if the borrower
defaults. Although the borrower may have been in receipt of a
qualifying benefit at the time the loan was taken out, this may
not be the case if s/he falls into arrears during the currency
of the loan. Alternatively the lender might discover when the
borrower fell into arrears that direct deductions were not possible
because of the maximum deductions rules (there is a maximum deduction
for arrears of £8.40 per week. Where deductions for arrears
exceed this amount, they are made in a set order of priority and
those for third party lender debts will be last in the list.)
3.30 Secondly, we consider that it is unacceptable
for deductions to private sector lenders to be set at the same
rate as deductions for the priority debts—rent, council
tax, child support, magistrates court fines, fuel and water—currently
in the scheme (5% of the income support personal allowance for
a person aged 25 or over—currently £2.80 per week).
Research by Citizens Advice into the available income of CAB debt
clients shows that 40% of our debt clients on income support have
no money left after their essential expenses to repay their credit
debts. Token repayments of £1 per month is all that they
can realistically afford.
3.31 Thirdly, we have concerns at the substantial
cost of establishing the scheme, with £10 million of the
Financial Inclusion Fund earmarked for this purpose.[82]
This represents 8% of the total Financial Inclusion Fund, and
22% of the amount allocated in the Fund to expand access to face
to face debt advice, yet there is no detail as to how this money
is to be spent. In these circumstances, Citizens Advice considers
that the Treasury Select Committee should require DWP and HM Treasury
to provide a detailed breakdown of how this £10 million is
to be spent.
3.32 Finally, we consider that it is vital
that the government consults publicly about the reforms beyond
the social lending sector and the credit industry. This is because
the proposal is, in some respects, controversial and one which
may not deliver on its stated intentions.
3.33 On a more fundamental level, we consider
that it would be wrong to extend the third party deduction scheme
without first undertaking a thorough review and revision of the
existing scheme. Citizens Advice set out the main problems with
the current scheme in Take it Away, CAB evidence on the DWP third
party deductions scheme and financial inclusion, which was published
in March 2005. Since then we have been working with NCC, Help
the Aged, Consumer Council Water, Water UK, energywatch and the
Energy Retail Association to lobby DWP and DEFRA to revise the
current scheme along the following lines:
— Use of the third party deductions
scheme as a budgeting tool by offering it as a payment option
of choice not as a repayment arrangement of last resort.
— Allow consumers to join the scheme
and remain on the scheme when they are not in arrears so that
they do not build up debt.
— Extend the scheme to include all
income replacement benefits (including tax credits) to widen the
numbers.
— Allow consumers who move from one
benefit to another to remain on the scheme to encourage continuing
bill payment.
4. FINANCIAL
EDUCATION AND
ACCESS TO
FINANCIAL ADVICE
Financial education
4.1 Over the past few years Citizens Advice,
together with other key agencies, such as the Financial Services
Authority have highlighted the problem of a growing gap in financial
literacy skills amongst the population at large.
4.2 There is a wide range of research and
evidence from the public, private and voluntary sector illustrating
this, for example an FSA study in 2004 (NOP Consumer Research)
found that just over a quarter of all adults said that they did
not think they were good at managing money, and one third said
that they would prefer not to think about planning their finances
at all. Two out of three consumers feel that financial matters
are too complicated for them (FSA, Better informed consumers,
2000). Research for Citizens Advice has found that 23% of people
with credit and loans have no idea how much they owe. (Mori, Financial
over commitment, 2003).
4.3 Consumers pay a high price for being
ill informed and unconfident when making crucial financial decisions.
In a report from Citizens Advice in 2001 we estimated that lack
of financial literacy was costing individuals and the wider economy
at least:
— £4 billion paid in unnecessary
interest on consumer credit because consumers were not able to
evaluate the best deal for them;
— £4.5 billion in inappropriate
debt consolidation borrowing; and
— £3 billion in unclaimed income
from means tested benefits.
4.4 It is of great concern to Citizens Advice
that consumers have continued to accumulate very significant levels
of personal borrowing with no discernible matching improvement
in their financial capability. Every day CABx are advising people
on significant debt problems the scale and nature of which could
have been reduced, or even averted completely if consumers had
greater ability to deal with financial matters effectively and
make better financial decisions.
4.5 Arising from this concern Citizens Advice
Bureaux throughout England and Wales are responding by creating
local financial education services. In addition to helping people
solve money problems through debt advice and providing public
information more and more we are helping adults and young people
to develop the skills to manage their finances effectively. Activities
range from delivering sessions to young people in schools to running
structured courses for adults in the community. We can provide
the Committee with a full directory of all the local services
we are aware of.
4.6 We have been delighted to be able to
work with the major financial firm Prudential plc to create a
national project, Financial Skills for Life, now entering its
fourth year, to enable us to give leadership to the work of bureaux
in this area and to build capacity by identifying best practice
and evaluating what works.
4.7 We want the CAB service to play an increasing
role in preventing debt and other financial problems arising through
financial education in the community. Bureaux will require the
resources to deliver more in this area. Our own strategy is aimed
at:
— continuing to identify and promote
best practice amongst our bureaux;
— developing a clear set of standards
for these services in terms of level of service and approach,
including identifying a level of service or activity that any
CAB could take on with minimal cost/additional resources (this
is likely to be achieved through community/public information
initiatives and media work); and
— developing and increasing our work
in partnership with others who want to help us make more of a
difference to people with.
4.8 We expect our focus to be mainly on
working with financially and socially excluded adults, reflecting
our client base.
4.9 The issue of financial capability is
as critical to consumers who are financially excluded, as to any
other consumer. People who are financially excluded tend to have
lower incomes and thus it is arguable that the ability to deal
with simple financial matters such as borrowing and budgeting
is even more critical where one has limited financial flexibility.
In addition, for those people who are financially excluded and
have limited practical experience of choosing and using financial
products equipping them to do so should be integral to an effective
financial inclusion strategy.
4.10 Citizens Advice has actively supported
the initiative by the Financial Services Authority to establish
a Financial Capability Strategy for the UK. We have been represented
on the steering board and many of the working groups created by
the FSA. In addition a number of Citizens Advice projects have
been identified as pilots for the formative stage of the FSA strategy.
We are very keen to see progress with this Strategy. We support
the focus of the Strategy on education, information and advice—all
three elements are important, financial capability will not improve
simply through giving information. However so far it is not clear
to us how much consumers who are financially excluded are properly
encompassed within the strategy. Activities to address financial
capability of adults are likely to involve significant resources.
We think there are significant gains to the economy, the public
sector and financial firms and markets from investment in creating
more confident consumers—but it appears the business case
to UK plc has yet to be fully appreciated.
4.11 More widely regulation and business
practice in terms of product design, terms and conditions and
sales and advice practices on the part of firms can play a huge
role in addressing financial capability of consumers. FSA and
other research has highlighted that financial firms are the most
significant source of financial information for consumers. Firms
have the most potential to reach consumers at large. If products
are designed with no regard to the level of financial literacy
of consumers, issues such as small print and unfair and inexplicable
terms can frustrate consumers from understanding products and
choosing effectively. This was highlighted for us in our recent
report of a pilot project where independent financial advisers,
IFAs, provided advice pro-bono to CAB clients. In this
case many of the enquiries they dealt with involved the need for
"translation" to take place between the firm and the
consumer who could not understand letters and contracts sent to
them.
4.12 We think that a simple solution to
complexity in financial products and literature would be for all
firms, and government, to financial literacy proof all forms,
leaflets, letters—making it a policy to produce clear, simple
products and communications where these are addressed to individual
consumers. Regulators should also be looking for this approach
on the part of firms they regulate.
Access to financial advice
4.13 In addition to education, individual
advice on financial matters is important, and as important in
our view for people who are financially excluded, and have less
practical experience to draw on. It has been widely acknowledged
that there is a gap in the provision of financial advice for people
on low incomes. In this context we distinguish between financial
advice on choosing and using financial products such as insurance,
savings or borrowing and money advice to deal with problem debts.
4.14 Citizens Advice would like to move
away from our traditional role of emergency help with debt to
a more preventative role. Many Citizens Advice Bureaux already
have financial literacy projects. We feel that the provision of
free generic financial advice to low and middle income groups
would assist consumers be more confident with their finances.
Our vision for the CAB service is to have sufficient resources
to deliver a holistic financial service giving financial literacy,
financial and debt advice to low and middle income groups, in
partnership with others where appropriate.
4.15 We would not see CABx offering specific
financial advice, potentially resulting in consumers selecting
a specific financial product. However, there may be potential
for CABx, if properly resourced, to develop generic financial
advice services for their clients.
4.16 Generic Financial Advice (GFA) stops
short of product related advice, and as such is not regulated
by the FSA. As a stand-alone service it is not provided at the
moment by any organisation.
4.17 The review of the Financial Services
and Markets Act 2000 has brought some de-regulation of financial
advice provided by not for profit agencies such as the CAB service,
thereby allowing debt advisers to give advice on mortgages, credit,
insurance and Child Trust Funds. This is a welcome step as it
frees our advisers to give advice on relevant debt related financial
matters but simply cutting CABx out of FSA regulation does not
mean services can or will be provided. Our advice services are
quality assured, and underpinned by liability insurance and all
advisers are trained and supported to deliver quality advice to
the public. To bring new areas of advice giving into the scope
of our core service would require additional training and support
to ensure quality of advice is maintained. Our money advice services
are consistently over-subscribed and any extension of our services
would be extremely difficult and could only be achieved with substantial
long term funding. Money advisers are certainly interested in
offering more preventative financial advice services but would,
rightly, not want to drift into this area of advice in an amateurish
fashion, without the proper resources and support (see research
by the FSA Widening the Scope, 2003).
4.18 Citizens Advice has been exploring
whether we could bring financial advice within the reach of our
clients through partnership working with IFAs. We have just completed
a small scale pilot project working with IFAs on a pro-bono basis
to deliver free GFA to people on low and middle incomes. The pilot
has demonstrated beyond doubt that there is a real need for generic
financial advice among this group that current provision has failed
to meet. It has also demonstrated the success of IFAs working
pro-bono in partnership with Citizens Advice Bureaux and their
clients to meet this need. We are now looking for funding to conduct
a larger scale and longer term project to test and evaluate this
further.
5. INCENTIVES
AND BARRIERS
TO SAVING
Barriers to savings—the benefits system
5.1 Few CAB clients have savings or assets.
A 2004 survey of CAB debt clients found that 44% had assets and
only 10% had savings in a bank or building society accounts.
5.2 The most obvious barrier to saving for
people in poverty is that their incomes are too small to sustain
anything other than essential spending. Benefit levels are extremely
low. People on income support might receive as little as £56
a week to meet all their living expenses except rent. People on
incapacity benefit, even those with children, might get as little
as £4,000 a year to live on.
5.3 The capital rules that apply to benefits
also act as a structural disincentive to save. Citizens Advice
welcomed the Government's decision to raise the capital limits
from £3,000 to £6,000, announced in the Budget 2005.
From April 2006, people receiving income support or jobseeker's
allowance will be able to hold twice the amount of capital before
benefit is reduced. But the rules on "tariff income"
remain the same; that is that every £250 of savings over
the £6,000 is assumed to produce a weekly income of £1.
These rates of return are unrealistic. Currently, once a person
has £6,000 in capital, they are assumed to be receiving a
rate of return of 10.4%. The base rate is 4.5%. From April 2006,
the same tariff income will apply on capital over £9,000,
even after the capital limits have risen. In contrast, the tax
credits system takes into account actual income from savings and
investments. This is a much fairer system, which should be adopted
by the benefits system.
5.4 Another obstacle to saving is the rules
relating to deprivation of capital. If people are considered to
have intentionally got rid of their savings in order to qualify
for means-tested benefits, they are deemed to have "notional
capital". The incorrect or unfair application of this rule
causes considerable anxiety and upset, and serves as a disincentive
to saving.
A CAB in Bedfordshire saw a couple, the husband
was out of work and spoke little English, the wife was disabled
and in receipt of benefits. The wife had a joint savings account
with her son and two ISAs in her name. The couple also had a joint
bank account with just over £3,500 balance. All this is deemed
to be their capital so the husband was not entitled to income-based
jobseekers allowance. They felt they needed the money for family
expenses however, they were also aware that the capital limit
for income based jobseekers allowance was £8,000 and that
if they spent some of their capital it could well be deemed deprivation
of capital. They were so frightened and worried about reducing
their capital below the £8,000 limit that they were not spending
money on necessities.
A CAB in Greater Manchester saw a client who
had applied for housing and council tax benefit on the advice
of the bureau, when she moved into sheltered accommodation. She
had been living with her son who now owned the client's former
marital home (sold eight years ago). The client received the benefits
but was shortly informed that her benefits were being suspended
pending an investigation into the client's former marital home.
The local authority initiated the investigation on the basis of
deprivation of capital, even though the client has never claimed
HB or CTB before and despite the fact that the client sold her
home some eight years previously.
6. THE ROLE
OF THE
GOVERNMENT, THE
FINANCIAL SERVICES
AUTHORITY AND
OTHER BODIES
AND ORGANISATIONS
IN PROMOTING
FINANCIAL INCLUSION
6.1 In the joint pamphlet Beyond bank
accounts[83],
Citizens Advice and IPPR described financial inclusion as being
when "citizens have access to appropriate financial products
and services and the opportunity, ability and confidence (and
appropriate support and advice) to make informed decisions about
their financial circumstances, as would be regarded as a minimum
to organise their finances in society effectively."
6.2 This means that tackling financial inclusion
will only happen with action by government, the public sector,
financial firms in all relevant markets, regulators and a wide
range of bodies and organisations. Financial inclusion is a shared
responsibility and should be a shared goal between bodies as varied
as Jobcentre plus and the pension service, the National Offender
Management Service, registered social landlords, third sector
lenders, mainstream lenders, insurers, mortgage lenders, local
government, the Office of Fair Trading, the Financial Services
Authority and many others.
6.3 Citizens Advice considers that Government
departments with an interest in financial inclusion to help them
meet their policy goals should include ODPM, the DTI, the Home
Office and the Treasury. Departments concerned with tackling poverty,
protecting consumers and ensuring fair markets, building safer
and better communities and a healthy economy all have a stake
in this and can help.
6.4 In Beyond bank accounts we argued
for a political champion to achieve consensus across government
and further action to join up government policy. More widely we
considered that full financial inclusion would only be realised
by a number of stakeholders improving their performance. We wanted
to see an agenda encompassing action on improving financial literacy;
improving access to advice; better access to affordable credit,
including a thorough overhaul of the social fund; market reforms
to deliver and promote simpler products; responsible lending practices;
partnership work with trusted intermediaries and commitment across
the public and private sector.
6.5 Citizens Advice have, therefore warmly
welcomed the Government's renewed strategy to address aspects
of financial exclusion, including through the investment of £120
million in the development of capacity in the third sector lending
market and the substantial amount of new funds which are in the
course of being distributed for face to face money advice (totalling
£52 million over the three year life of the fund).
6.6 We understand that the bids made from
all sources for the money advice funds have significantly exceeded
the available funds at the expressions of interest phase in Autumn
2004. There is significant unmet demand for money advice to help
low income households deal with problem debts and these funds
will enable CABx to help many more people over the next few years.
We are presently awaiting the outcome of the final round of the
bidding process and are, thus, not able to say precisely how many
additional money advisers we will be able to employ but it is
possible that the fund could secure a doubling of the number of
money advisers able to offer specialist casework advice to clients
of CABx.
6.7 The shared goal with the banks to commit
to halving the number of households without access to banking
services is also very important. In our new report, Banking Benefits,
we highlight the continuing need to address the problems of access
to banking and the difference this can make.
6.8 Changes which have already been announced
in the design of the social fund are also important (for example
the abolition of the so-called double debt rule which denied borrowers
with existing loans additional loans, even if they could meet
the repayments).
6.9 We also welcome, and are playing our
part in, the Financial Inclusion Taskforce. We support the ideas
emerging from the Taskforce for action to promote financial inclusion
which brings about the joined-up activity and partnership working
needed to make a difference to people who are financially excluded.
Many organisations could contribute whether this is simply through
contact with individuals to alert them to the alternatives available
to them or by taking action to create services, for example helping
to establish or promote credit unions; helping consumers to get
a better deal from fuel suppliers and reduce their costs; promoting
insurance with rent schemes, etc
6.10 Much has been done and is being done
to promote financial inclusion. The Government's commitment to
the issue is clear, and the availability of funds to improve supply
of money advice and affordable credit is clearly extremely helpful.
6.11 But there is a need to maintain momentum
and have a longer (at least medium term) strategy which all engaged
partners can work to. For example the £120 million fund is
time-limited and this creates problems about securing value for
money and building capacity only to lose it. The impending Spending
Round will be critical to whether the investment being made here
can continue and be shown to have made a substantial difference
to people, over time.
6.12 In addition, the policy agenda described
in the Government's financial inclusion strategy needs expanding
to clearly encompass:
— a reform of the social fund—its
approach, design and delivery;
— a full range of financial services
such as insurance, mortgage borrowing, savings and pensions as
are appropriate for people who have been experiencing financial
exclusion but whose financial standing and life chances can be
improved by inclusion;
— action to improve financial capability
of consumers experiencing financial exclusion; and
— action to identify and promote the
business case for financial inclusion to UK plc, ie the government
and the private sector, including potentially increased need for
incentives for firms and the voluntary and local government sector
to join in and deliver together.
6.13 The Taskforce is at a relatively early
stage in its work and has thus far focussed on acting as a sounding
board for the early stages of Departmental programmes for distributing
funds and evaluating and gathering evidence for measuring progress.
In the following two years we would hope the Taskforce can become
a fulcrum for pushing forward the financial inclusion agenda and
securing the engagement of all those who can make a difference
here, although it may need resources of its own to be able to
do so.
7. EXTENT TO
WHICH FINANCIAL
INCLUSION MEASURES
CAN CONTRIBUTE
TO COMBATING
POVERTY AND
REDUCING BARRIERS
TO EMPLOYMENT
7.1 In the report Beyond bank accounts
Citizens Advice stated that lack of action to tackle financial
exclusion would limit strategies to tackle government priorities
including:
— Social inclusion and neighbourhood
renewal strategies, as communities need access to financial services
locally, and individuals being able to use a range of financial
services is a step towards full social inclusion.
— The eradication of child poverty:
families living on low incomes would save money if they had access
to a wider range of affordable financial services. Families may
incur extra costs through not using mainstream financial products,
and through poor financial understanding, may not claim the tax
credits and benefits they may be entitled to.
— The ability to tackle pensioner poverty:
people may not save for retirement because pension products are
too complex and there is little accessible advice. Pensioners
may also not be claiming pension credit because of reasons linked
to financial exclusion.
— Delivery of the government's overall
welfare strategy: where individuals are responsible for their
own provision, they may not be able to access and use suitable
private products, and where state support is available, benefits
and tax credits go unclaimed. Access to basic banking can also
support unemployed people become job ready.
7.2 CAB evidence suggests that difficultly
in gaining access to simple financial inclusion measures, such
as access to basic bank accounts, presents a significant barrier
to employment:
A CAB in North Yorkshire reported that they
were approached by a couple in February 2005 who were unable to
open a basic bank account because both partners were undischarged
bankrupts. The inability to open an account had meant that the
client's partner had lost a job offer because the employer had
insisted on paying by direct transfer. Both the client and her
partner therefore remained on benefits.
A Somerset CAB's client was offered a job and
so needed to open a bank account to receive his wages. However,
as he was homeless this proved impossible. He found himself caught
in a vicious circle in which he was unable to open a bank account
without an address, he could not find a place to live without
one month's rent and deposit, and yet could not start work without
opening a bank account to receive his wages.
January 2006
72 Financial Overcommitment, research study conducted
for Citizens Advice by MORI, July 2003. Back
73
Promoting Financial Inclusion, HM Treasury, December 2004. Back
74
Pre-Budget Report 2004-Opportunity for all: The strength to take
the long-term decisions for Britain, HM Treasury, 2 December 2004,
p 100. Available at: http://www.hm-treasury.gov.uk/media/92B/F6/pbr04_chap05_
282.pdf Back
75
Basic bank account growth continues, British Bankers' Association,
24 November 2005. Back
76
On 26 July 2005 the OFT wrote to eight major credit card companies
to consult on its provisional conclusion that the levels of default
charges they impose (eg for late payments) are excessive. Further
information available at: http://www.oft.gov.uk/News/Press+releases/2005/135-05.htm. Back
77
See http://www.link.co.uk/atm/signage.htm Back
78
Currently all basic bank account holders can access their money
over the counters at Post Office branches, but only current account
holders with the following bank and building societies can do
so: Barclays, Lloyds TSB, Alliance & Leicester, Co-operative
Bank, Bank of Ireland, Clydesdale, Cahoot, Smile, Nationwide and
First Direct (Scotland only). Back
79
Home Credit Customer Research, Competition Commission 2005. Back
80
Over-indebtedness in Britain, DTI 2005. Back
81
Promoting financial inclusion, HM Treasury, December 2004. Back
82
Pre-Budget Report 2005-Britain meeting the global challenge:
Enterprise, fairness and responsibility, Paragraph 5.48. Back
83
Beyond bank accounts: full financial inclusion, Sue Regan
and Will Paxton, Citizens Advice and IPPR, 2003. Back
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