HC 271 Money Advice Service

Written evidence submitted by the British Bankers Association

The BBA welcomes the opportunity to contribute to the Treasury Committee Inquiry. The BBA is the leading association for the UK banking and financial services sector, speaking for 223 banking members from 60 countries on the full range of UK or international banking issues and engaging with 37 associated professional firms. Collectively providing the full range of services, our member banks make up the world’s largest international banking centre, operating some 150 million accounts and contributing £30 billion to the economy.

Executive Summary

This submission outlines the BBA’s views on a number of aspects of the Money Advice Service’s structure and performance, including:

· The BBA supports the aims of the MAS to provide money and debt advice to consumers. We believe that a fair and proportionate levy against all financial services providers and creditors is appropriate to fund the services offered by MAS.

· We believe the MAS is the appropriate vehicle for providing and coordinating national money advice and debt advice services. It should not however seek to replicate or duplicate services that are already provided by other effective agencies.

· The MAS’ forward strategy and its funding requirements are based on unpublished consultancy work which, we are told, has established that MAS should aim to reach over 11 million consumers per year by 2016/17. This work is not publicly available and MAS is yet to demonstrate how this target is realistic, achievable or necessary. Stakeholders are therefore unable to judge whether the forward strategy and current business plan and budget are appropriate, or why and how a significant increase in marketing spend is an appropriate device towards reaching this target.

· MAS should determine its operational strategy; annual business plan and funding needs after consultation with the financial services industry and other key stakeholders.

· MAS should be able to provide objective evidence of achieving value for money in using the industry levy. MAS’ annual reports should therefore demonstrate the extent to which its funding has been used objectively, efficiently and effectively.

· MAS’ role in the coordination and provision of debt advice should extend beyond the simple provision of information and the tendering of services, to include the objectives of improving the consistency and efficiency of debt advice and of debt management solutions.

Meeting its statutory objectives

2. The BBA believes that the MAS has appropriate statutory objectives and that these broadly encapsulate the financial capability needs of UK consumers. However, we believe that the MAS should have an additional statutory function in order to meet these objectives. A statutory function of MAS should be to better coordinate and align the activities of the various money advice charities and organisations that currently provide services in scope of MAS’ objectives. At present the different approaches of these various organisations towards money and debt advice deliver outcomes for individual customers but create inefficiencies and inconsistencies across the sector. This means that funds are not used to their best potential and consumers can experience different standards of advice depending on where they seek help.

3. The organisation should more tightly define its target beneficiaries (beyond ‘members of the public’) and its primary delivery mechanism (i.e. to reach consumers directly or in partnership with other organisations) to reduce confusion about the organisation’s purpose, give focus to its activity and enable its success to be more closely measured.

4. We believe that the MAS must do more than the simple provision of passive information and tools, online and via telephone, to meet (and demonstrate that it meets) its objectives. Passive information has to be found by the consumer. This not only means that people need to know that the information exists and where to find it; but for that information to be useful, the consumer must realise that they need information and be motivated to access it at the most appropriate time for the information to be of use.

5. At present, the MAS is simply providing existing knowhow to an existing market and hoping to achieve penetration by brand-building. The BBA believes that creating a depository of information and promoting its availability and usefulness is only a starting point. In order for consumers to become empowered - and for the MAS to truly meet its objectives – we believe that MAS should seek to be more dynamic in getting information to consumers when it is likely to be of most use to them.

6. For instance, the MAS website should have a registration process which asks users to provide high level personal and financial information and collects information on the user’s financial interests, needs and aspirations. With the user’s consent, MAS could then proactively contact users, via email with advice, information and alerts. These could be timed to coincide with life events; economic changes etc so that consumers are presented with key information when it is likely to be of most use. The data collected by MAS during the registration process would also provide crucial M.I. for understanding MAS’ audience and developing its strategy accordingly.

7. This mirrors how commercial organisations already act with their customers and its delivery would require little ongoing resource after the initial registration, data collection and data protection processes were established.

8. Similarly, the MAS should cover financial topics and consumer experiences beyond the traditional. For instance, no information is currently available on the MAS website about peer-to-peer lending or mobile payments, and although users can find information relevant to having a baby or getting a divorce, there are no specific sections to cover, for example, disabled users, benefits claimants or armed forces personnel.

Accountability

9. The scrutiny and oversight of the MAS by the FCA and the NAO will be crucial to holding MAS to account. Under a MAS/FCA memorandum of understanding, the FCA should retain the FSA’s power to order reviews of the economy, efficiency and effectiveness of MAS’ use of resources. This would be in addition to the power the NAO will have to launch value for money studies.

10. To assess the effectiveness of the MAS, there needs to be detailed evaluation of the services being provided and the outcomes they deliver for consumers, including the financial health check and the new triage system for filtering to appropriate debt advice. Without rigorous evaluation, it will be difficult to assess whether the organisation has been successful in meeting its objectives and any value derived from directly promoting its brand. A clear consumer charter and set of KPIs would help MAS to achieve this.

MAS’ place in the market

11. To be seen as an authoritative source of consumer financial information, the MAS is competing against well-respected commercial brands such as moneysupermarket.com and moneysavingexpert.com, which have ongoing relationships with their customers and therefore an ‘open door’ to provide help and advice. Similarly, in the charity sector Citizens Advice and the CCCS have a long-standing reputation for providing impartial, free-of-charge debt advice. It will therefore take time for the MAS to build its reputation amongst consumers and it should explore with financial providers how the industry can assist the MAS in reaching their customers.

12. Although we have an established money advice market the BBA does not believe that MAS’ functions should simply be provided by an existing money advice agency or consumer group. Whilst others may have greater brand awareness and more experience in the provision of front-line advice, the MAS has a unique position because it is dedicated only to money and debt advice; it has been established on a statutory, independent and ultimately accountable footing, and it starts (almost) with a blank page and is not limited in scope by its history; governance structure, footprint or established business practices.

MAS’ target audience

13. The adult population of the UK is approximately 43 million. MAS identifies that 19 million adults could benefit from money advice and believes that 11.3m (or 25% of the adult population) are ‘reachable’ by 2016. However, the MAS has not published its analysis so it is not entirely clear how it has identified its target audience.

14. The BBA believes that lack of knowledge of financial matters cuts across all consumer segments in the UK but that there are individuals who are more at risk of the consequences of poor decision making. It is not yet clear whether MAS is going to focus (only) on specific consumer sectors to use resources where it believes they can have most impact, or alternatively whether MAS aims to use a broad brush approach which aims to provide some all-encompassing advice to all sectors. Currently, it appears that the service is universal and therefore aimed at all consumers regardless of income, age, gender, or financial capability levels.

15. The BBA believes that the MAS should be cognisant to forthcoming regulatory changes and the impact these could have on the need for advice. Mass market consumers may have the largest need if introduction of the Retail Distribution Review restricts their access to affordable advice. Introduction of a suite of simple financial products under a government-led initiative may also require the MAS to play an educational role. The introduction of Universal Credit is likely to have significant implications for the need for money and debt advice amongst the most vulnerable consumers who will need to meet their needs from a single monthly benefits payment (in arrears), including meeting their own housing costs.

16. The BBA strongly believes that financial education should be provided in schools, further education establishments and workplaces. MAS should play a key role in this provision and should work with the Government and organisations such as pfeg to identify how, if at all, financial education should be provided on the national curriculum. This would complement the work already being undertaken by many financial services providers through their corporate responsibility work. As a first step, the MAS should map existing activities to identify gaps in provision and ensure resource is directed to where it is most needed in a joined-up way.

17. With regard to the MAS’ newest responsibility for coordinating and providing debt advice, the BBA believes that MAS can play a crucial role in improving the services and outcomes that consumers experience when trying to deal with over indebtedness. We think the MAS should aim to fund services, standardise practice and interact with consumers with the express aim of shifting the debt advice and debt remedy market towards more fair and equitable providers of appropriate and sustainable solutions.

MAS’ fees

18. MAS’ forward strategy and funding requirements are based on unpublished consultancy work which we are told has established that MAS should aim to reach over 11 million consumers per year by 2016/17. However, this work is not publicly available and MAS is yet to demonstrate whether this target is realistic, achievable or necessary. Stakeholders cannot therefore judge whether the forward strategy and current business plan and budget are appropriate, or why and how a significant increase in marketing spend is an appropriate device towards reaching this target.

19. At present, FSMA Schedule 1A only requires the MAS to consult on its proposed budget and business plan in private and with a restricted audience, which does not include all interested parties. A public consultation on the MAS budget therefore only takes place within the wider FSA budget consultation and only after the MAS budget and annual plan has been signed off by the FSA Board.

20. The BBA does not believe it appropriate that the MAS can determine its annual business plan and funding needs for debt advice and money advice without a full and transparent consultation with its funders. We all have a shared interest in ensuring that funds are used appropriately and directed to where they are most needed and most likely to be effective. Open consultation would provide a useful check on the organisation’s strategy and direction of travel and would help to ensure it is delivering services in the most effective way. We therefore believe that a more inclusive and cooperative partnership approach is required.

21. Although the MAS is currently considering how it can most effectively create a sustainable funding model for its debt advice functions; for the period until 2013 it will only seek funding from FSMA authorised creditors. We firmly believe that from 2013 onward all MAS’ debt work should be funded on a ‘polluter-pays’ basis so that all entities with whom a debt can be created contribute proportionately to the provision of debt services. This includes financial and non-financial creditors and the public sector.

Conclusion

22. The BBA supports the aims of the Money Advice Service and our members believe in paying fairly and proportionately towards meeting these aims. We are keen to work with the MAS to help it coordinate the effective and efficient provision of money and debt advice.

23. Our concerns are focused on the lack of transparency and accountability that have punctuated the creation of the MAS in its infancy. We believe that it is too soon in the organisation’s genesis to judge whether it is meeting its objectives, but we hope that going forward it is sufficiently open, transparent and accountable for stakeholders to be able to judge its performance as it roles out its policies and services.

June 2012

Prepared 15th June 2012