HC 271 Money Advice Service

Written evidence submitted by the Council of Mortgage Lenders


1. The CML is the representative trade body for the first charge residential mortgage lending industry, which includes banks, building societies and specialist lenders. Our 109 members currently hold around 95% of the assets of the UK mortgage market. In addition to lending for home-ownership, the CML’s members also lend to support the social housing and private rental markets.

Executive summary

2. We welcome the opportunity to submit written evidence to the Treasury Committee’s inquiry into the work of the Money Advice Service (MAS). We have a strong interest in seeing MAS meet its statutory objectives, not least because of how our members contribute to its funding. The provision of both money advice and consumer financial education is a key cornerstone in supporting our members’ efforts to lend responsibly and treat customers in financial difficulty fairly. We are strongly supportive of the role money advice can play in this regard.

3. We would make the following remarks in relation to MAS’s activity.

· The recent efforts to build a robust evidence base are welcomed, but care must be taken not to reinvent or duplicate previous endeavours.

· The MAS’s own advice offerings should not be advanced to the detriment of its coordination of debt advice or the activities of other well-established, proven bodies.

· There should be strong and transparent accountability mechanisms in place to oversee and challenge MAS’s delivery against budget. We welcome involvement in MAS’s senior-level industry forum.

Responses to the Committee’s questions

To what extent is the Money Advice Service (MAS) meeting its core statutory objectives:

· to enhance the understanding and knowledge of members of the public of financial matters (including the UK financial system), and

· to enhance the ability of members of the public to manage their own financial affairs?

Are these the right objectives for MAS to have?

4. We believe that these are the right high level objectives for MAS. With MAS having launched a little over a year ago, it is too early for us to gauge how successfully those objectives are being met.

5. As a general observation, we believe that MAS has sought to build and promote, not only its own money advice offerings, but a brand before it was given its debt advice coordination role in April this year. Nearly £20m has been spent or allocated to consumer communication and marketing across 2011/12 and 2012/13.

6. In undertaking its coordination role, MAS has moved in the right direction in developing an evidence base to inform its work. The comprehensive research into debt advice it commissioned from London Economics and IFF Research will better enable MAS to make the right choices in an area that is critical to get right. On this piece of work in particular, MAS will need to engage with creditors and existing money advice providers to derive the best outcomes and avoid unintended consequences.

7. But while MAS is right to ensure that it has a robust foundation of evidence, it is operating in a well researched area and should take every account from research has already been undertaken, to avoid duplication.

8. Looking longer term, MAS’s success or otherwise in meeting its statutory objectives will be more dependent on how it undertakes its non-exhaustive statutory functions. We would prefer MAS to use its leadership position to point towards and propagate other existing providers’ good work, with direct delivery used where it can bring true additional value.

How effective is the MAS’s internal administration and expenditure on staff and other resources?

9. We are encouraged by MAS’s reduction in staff costs over the past year (£6.6m budgeted in 2012/13 compared to £13.5m budgeted in 2011/12) and recognition that different skills were required to meet its new remit.

10. Our interactions with MAS are generally positive, although we have expressed reservations with the over-engineered process it has developed for reviewing customer facing material. This has taken the form of a procurement exercise to establish a panel of reviewers – we are far happier to engage on a cooperative basis, provided that the timeframes are feasible.

11. In the interim, we would prefer MAS’s development of customer facing material to focus on filling gaps not currently fulfilled by other providers or key priorities. Activity in this area appears too broad at present and risks diverting resources away from those areas where it can make most impact.

What accountability mechanisms are in place for the MAS? Are they sufficient? How can the effectiveness of the MAS be assessed?

12. As with any evolving organisation delivering new objectives, it is important that its work is independently reviewed so as to monitor outcomes against budget. We support the provision within the draft Memorandum of Understanding between the Financial Conduct Authority (FCA) and MAS for the FCA to appoint "an independent person to conduct reviews into the economy, efficiency and effectiveness into the economy of MAS’s use of its resources when carrying out its statutory function" and would argue that this should be widened to all of MAS’s functions. We suggest that this is timetabled at least once a year during the formative years of MAS.

13. We have appreciated MAS’s engagement through the senior-level industry forum and would want this to continue as MAS progresses its programme of work.

To what extent are the services provided by the MAS also provided by other organisations? How does the MAS compare to these organisations?

14. It is too early to fully assess the effect of MAS’s provision of money advice. In any event, although we are strongly supportive of the role that money advice can play, measuring the long-term direct effect on customers who have received advice is notoriously difficult. Comparing effectiveness across providers is equally hard to gauge. We would support MAS undertaking this role.

15. As alluded to above, we would rather MAS had taken a more considered approach to understand what other providers do well, how this could be enhanced through MAS’s coordination role and which gaps MAS could best fill through its own delivery. We reiterate here a remark we gave in response to HM Treasury’s informal consultation on the Money Advice Service in January of this year:

"The Money Advice Service’s delivery of debt advice must not be allowed to conflict with or impinge upon its ability to coordinate and influence the activities of other, well-established and effective bodies in the debt advice landscape, such as Citizens’ Advice, Money Advice Trust and Shelter.

We do not think that it is satisfactory to leave this to ‘a degree that the Money Advice Service deems appropriate’ as this could cause territorial disputes with the other bodies which the Money Advice Service might interpret in its interest. This could unintentionally undermine the very good work being delivered by the other bodies, in the context of mortgage payment difficulties. […] It could also impinge upon the targeted efforts many of our members currently undertake, fund and manage closely as part of their corporate social responsibility work.

We would support greater emphasis being placed on the definition of the scope and parameters of Money Advice Service’s coordination and provision of debt advice within its statutory function."

16. From a recent MAS announcement on the role of debt advice, we note that "[MAS] will work to raise the profile of the free-to-client advice sector". We believe that this will pose a challenge alongside MAS’s promotion of its own brand.

17. Given that demand for mortgage debt advice is likely to increase when base rate rises, we hope to see a considered development of the new debt advice delivery model, currently timetabled for 2013. It is important that customers most at need are not unintentionally disadvantaged during any transition or bedding down of this new model. We will be taking a close interest and engaging with MAS on creditor referrals and triage in particular.

Is the MAS reaching its target audience? Are any groups unable to access the MAS’s services? Who is worst affected by a lack of knowledge of financial matters? Should the MAS have a greater role in financial education in schools?

18. It is important to recognise that those customers needing money and debt advice are a broad group. As such, delivery channels will need to reflect their very different needs and circumstances. We welcome the recent announcement from MAS that it will continue to fund existing face-to-face projects in England and Wales, and new projects in Scotland and Northern Ireland, into 2012/13. We hope that this funding can pave the way for more targeted funding of face-to-face debt advice within the new delivery model.

19. On targeting particular cohorts of customers in general, we question whether significant spend on television advertising campaigns is the most cost-effective way. We note from MAS’s 2012/13 business plan that, when advertising is running, MAS experiences a 62% increase in website visits and an 87% increase in people visiting the health check. We would welcome more evidence from MAS on what the outcomes of this upturn in activity.

20. We feel that the MAS Business Plan for 2012/13 does not give enough prominence to capability building. In particular, we believe that financial education has become too marginalised in the plan. More should be done to promote financial education in schools and facilitate lifelong learning. The likes of the Institute of Financial Services (IFS) and the Personal Finance Education Group (pfeg) have done much in these areas. We would welcome MAS forging close links with these providers to understand the value of financial education in schools and build upon their good work. Although the lead time in realising the fruits of this could run into decades, we believe it to be vital if the UK is to foster a financially literate populace, more capable of managing their finances and better able to cope when difficulties do arise.

How appropriate is the model, using fees raised from financial services firms regulated by the FSA, by which the MAS is funded?

21. To justify the effectiveness of the funding model in time, it is vital that MAS’s delivery against objectives is monitored regularly and transparent so that the industry can understand the impact of its funding. A broad levy has obvious administrative advantages, but does not give firms the same degree of control and comfort that funding of bespoke and measurable projects has.

22. We will be monitoring the impact of the levy (and the outcomes delivered by MAS) to support the interests of our members and their customers.

June 2012

Prepared 15th June 2012