Consumers’ access to financial services Contents


The importance of financial inclusion

1.Access to financial services and financial inclusion are issues of fundamental importance to the Treasury Committee, UK consumers, but also the functioning of the economy. Financial inclusion matters to everybody, not just the disadvantaged or vulnerable. (Paragraph 17)

2.Being able to be in control of your own finances helps to keep people independent, confident, and in control of their own lives. It is highly likely that people who are in control of their own finances, are much more able to protect themselves from financial abuse and fraud. This is all the more important in a society where the pace of change is increasing all the time as new technology emerges. (Paragraph 18)

3.Throughout the Committee’s inquiry we have heard numerous examples of ways in which consumers have been excluded from financial services through no fault of their own, and in many cases, simply because some people with particular needs or characteristics are treated as an afterthought by financial services providers. (Paragraph 19)

4.We recommend that maintaining financial inclusion be of the utmost priority for financial services providers, the Government, and financial regulators, in order to maintain a society that does not leave large parts of society behind. (Paragraph 20)

Increasing financial inclusion

5.Basic bank accounts should be accessible to all consumers regardless of whether they are eligible for another bank account or not. To that end, the Committee recommends that all basic bank account providers should relax their opening restrictions on these accounts immediately, and recommend the FCA mandate banks to do so. (Paragraph 30)

6.All financial services providers who provide current accounts should act immediately to ensure that staff are trained to direct consumers who are rejected for a traditional current account towards a basic bank account, even if this would be with another provider. (Paragraph 31)

7.The Committee recommends that the FCA requires financial services providers to report how many basic current account openings they have rejected and the reason why. This information should be published bi-annually to increase transparency and oversight. (Paragraph 32)

8.The Committee recommend that the Treasury and the FCA consult on bringing in a standardised list of identification papers that are acceptable as identification for a basic bank account and that financial services providers should accept as many forms of identification as possible, and think creatively about more forms of identification that could be accepted. (Paragraph 33)

9.It is important that consumer education programmes are more organised to ensure a good coverage across all UK regions as well as across different consumer groups. The Committee will continue to examine and scrutinise the Government’s approaches to financial literacy in a wider context. (Paragraph 36)

10.The Committee welcomes initiatives such as Monzo’s voluntary block on gambling transactions, and urges other financial services providers to follow this example and introduce self-exclusionary gambling blocks of their own. In addition, they should offer customers the opportunity to exclude themselves either from borrowing altogether or from spending excessive sums of money in short spaces of time. (Paragraph 40)

11.Although there are obvious concerns about the privacy of consumer data, making more use of level-three transaction data—in order to allow consumers to set up spending blocks on items such as alcohol—should be explored. Allowing financial services providers access to such data—with the informed consent of consumers—could provide significant opportunities for additional consumer self-protection. (Paragraph 41)

12.UK Finance should work with financial services providers to find ways to increase the variety of self-exclusion spending and lending blocks available to consumers. (Paragraph 42)

13.The Committee recommends that the Government and the FCA consult on how the use of power of attorney works in practice with regard to financial services, and whether the current powers that exist are fit for purpose. The wider use of carer cards should be explored and encouraged by the FCA. (Paragraph 48)

14.The Committee expects UK Finance or the FCA to carry out a review and report back on the effectiveness of the FCA’s third-party access principles—committed to by the UK’s high street banks in 2017—by the end of 2019. (Paragraph 49)

Do vulnerable consumers pay more?

15.The EHRC told the Committee it does not have the relevant resources to investigate whether individual insurance firms’ treatment of customers with disabilities is compliant with the Equality Act or not. Responsibility for insurance companies’ compliance with the Act, both in individual cases, and for firm wide issues, should therefore be transferred to the FCA. (Paragraph 62)

16.The FCA told the Committee that it has the resources to look at individual firms’ algorithms to asses compliance with the Act, but—for reasons unknown to the Committee—chose not to ask for individual firms’ data when it held an initial call for input regarding the issue. This was a missed opportunity. The Committee is concerned that, despite the FCA telling the Committee that a number of firms could not give it assurance straight away that their pricing data is compliant with the Equality Act, the FCA did not choose to ask for more information. (Paragraph 63)

17.The Committee has heard that the FCA recommends consumers facing discriminatory pricing use more specialist companies that understand their individual circumstances better. This is not an adequate response to discrimination in breach of the Equality Act. While it may be the case that customers can seek a quicker solution by using a specialist insurer, illegal discrimination must be addressed by regulators. (Paragraph 64)

18.Insurance markets operate by pooling and spreading risk among a large group of policy holders or policy writers. By excluding individuals with specific needs from mainstream insurers, it is less likely that they will be able to benefit from the pooling of risk that travel insurance provides. Pursuing a policy of encouraging vulnerable customers to use specialist insurers is therefore not the optimum solution, and reduces choice for vulnerable customers. (Paragraph 65)

19.The Committee welcomes the CMA’s conclusions and recommendations regarding loyalty penalties and how they impact upon vulnerable customers. The Committee notes that the FCA is in the process of investigating the existence of loyalty penalties within the mortgage, insurance and cash savings markets, and expects the FCA to act upon those investigations swiftly once concluded. (Paragraph 74)

20.Based on the evidence given to the Committee, the FCA thinks that, due to the complexity of switching, simply providing customers with information about the loyalty penalty they are paying will be insufficient to motivate them to switch to a better provider. If this is the FCA’s view it must redouble its efforts to make switching a simpler process. (Paragraph 75)

21.In line with the CMA’s recommendation, the Committee recommends that the FCA makes it mandatory for firms to publish the size of their loyalty penalties on an annual basis to consumers so that consumers are fully informed. Even if many consumers choose to ignore such information, others will not, and the inclusion of such information may motivate firms to make efforts to reduce their loyalty penalty. (Paragraph 76)

Bank branch closures

22.Evidence received by the Committee made clear that certain groups who are likely to be more vulnerable, such as older consumers or those on lower incomes, are more likely to be impacted by bank branch closures. (Paragraph 91)

23.The increasing number of IT failures within banks, and the inability of financial services providers to serve their customers digitally during such service failures, provides a strong rationale for why banks cannot rely on their online and mobile channels replacing their physical presence through branches entirely. (Paragraph 92)

24.The banking industry has justified the closure of branches by highlighting the large increases in the use of online or mobile banking. It may be the case that for certain categories of customer a visit to their local branch is now an unusual occurrence. However, there are still large sections of society who rely on bank branches to carry out their banking needs. A bank branch network, or at the least, a face-to-face banking solution, is still a vital component of the financial services sector, and must be preserved. (Paragraph 93)

25.It is up to the industry to determine how best to maintain face-to-face banking, but options such as a greater expansion of mobile bank branches; sharing bank branch facilities with other banks, shops or community buildings; or pooling staff of different banks within one premises should all be considered. The Committee has not seen compelling evidence that competition law would prevent banks from sharing facilities. In its response to this report, the Government should set out whether this is the case. If it is the case, the Government should make changes to competition law to allow banks to share facilities in order to maintain a sustainable branch network. If the financial services market is unwilling to innovate to halt the closure of bank branches, market intervention by Government or the FCA may be necessary to force banks to provide a physical network for consumers. (Paragraph 94)

26.The Committee recommends that the Lending Standards Board—through its oversight of the Access to Banking Standard—should publish the examples of non-compliance by provider within its annual report on the Standard, to increase transparency and the potential for external scrutiny over branch closures. (Paragraph 95)

27.Efforts to maintain a bank branch presence on the high street should begin prior to the last branch in town announcing its departure. By the time the last branch in a community is announcing its closure, the process to retain a physical presence in a community may often be too late. (Paragraph 96)

28.The Committee commends the positive role that the Post Office plays in providing basic banking services to customers, especially in more rural communities. (Paragraph 103)

29.Despite its best efforts, the Post Office is not the optimum environment for consumers, particularly the vulnerable, to carry out their banking requirements for a number of reasons. Post Office staff are primarily trained in dealing with postal inquiries, and are not banking specialists. The Post Office cannot help customers set up basic banking transactions such as direct debits, and the layout of many Post Offices is not conducive to giving customers the privacy required to carry out basic banking transactions. In its present form, role the Post Office plays in providing private banking services to customers can be compared to that of an ATM and should not be seen as a replacement for a branch network, but a complementary proposition where available. (Paragraph 104)

30.There is a general lack of awareness of what the Post Office offers. The Committee welcomes the work done by UK Finance to promote the Post Office in two specific locations, but this campaign should be extended nationwide. Awareness of the Post Office should be considered and monitored as part of the remit of the Financial Inclusion Policy Forum. If awareness does not improve, the Committee will expect the Government to act by launching a nationwide promotional campaign. (Paragraph 105)

31.The Post Office, a Government-owned company, is making a loss on offering its basic banking services on behalf of commercial banks. Such an arrangement cannot continue in its current form. The Post Office should not be subsidising the big six banks’ lack of a branch network. In conjunction with its owners (the Department for Business, Energy and Industrial Strategy and the Treasury), the Post Office must ensure it receives adequate funding for the service it provides and places its services on a sustainable footing. If a renegotiation of the current arrangements is necessary to make the scheme profitable, the Post Office should do so, with the full support of the Government. (Paragraph 106)

32.Many small towns and rural areas have seen bank branches close, leaving them with no high street banking services. The bank branches were closed in the knowledge that the Post Office would not be able to provide some key services. In these “last bank” cases, the banks should be required to make provision for “banking hubs” within the local Post Office. The “hub” should be properly funded, with an agreed private and business banking provision set by the Department for Business, Energy, and Industrial Strategy (BEIS), and the Treasury. Post masters must be trained, equipped and compensated to make the hubs viable. BEIS should make an immediate assessment of what the banking provision should be, the indicative cost per hub, and propose how the banks should fund it. (Paragraph 107)

33.It is important that consumers continue to have the freedom to pay for goods and services however they choose. In order to protect that freedom, free access to cash must be maintained for those that need it. While the Committee is concerned by the rate at which free to-use ATMs have been closing, it is clear that these closures are symptomatic of a wider issue. The UK’s cash infrastructure, including but not limited to the ATM network, was designed for a world in which cash is very widely used. As cash usage falls, it is important to consider how this infrastructure can be redesigned to better reflect cash’s declining popularity. The final report of the independent Access to Cash Review contains a number of recommendations to Government, the regulators, and industry which, taken together, are designed to ensure that widespread free access to cash is upheld. The Committee supports these and recommends that the Government, the regulators and industry implement the recommendations that are aimed at them respectively. All the stakeholders involved should provide a timeline for the implementation of the recommendations in their response to this report. (Paragraph 118)

34.If no action is taken, the UK risks inadvertently becoming a cashless society. For a large portion of society, including some of the most vulnerable, this would have stark consequences. (Paragraph 119)

The Equality Act and the provision of reasonable adjustments

35.The EHRC is the statutory body for enforcing the Equality Act and has statutory powers for doing so. However, it has confirmed to the Committee that it does not have the relevant resources or expertise to investigate each individual case where a financial services provider is potentially in breach of the Equality Act, or is failing to provide reasonable adjustments, and that therefore such issues were not one of its strategic priorities. At present, no other statutory body has the power to enforce the Equality Act. As a result, the only recourse available to individual consumers is to take financial services providers to court themselves. This is unacceptable. To expect vulnerable individuals to be able to take their financial services provider to court in order to enforce their rights under the Equality Act is absurd. Taking a high street bank to court would be prohibitively expensive and daunting for an individual. Given the FCA told the Committee it does have the expertise and resources, the Government should give the FCA the power to take on the enforcement of individual cases relating to financial firms’ compliance with the Equality Act, in addition to the EHRC. (Paragraph 131)

36.The Committee is of the view that providing British Sign Language interpreters—with notice—should be considered as a reasonable adjustment under the Equality Act and therefore non-compliance should be enforced by the Equality and Human Rights Commission. The argument that providing British Sign Language could only be classed as reasonable in the context of the size of a firm would excuse smaller firms from providing services to the hard of hearing. (Paragraph 139)

37.Financial services providers should act immediately to ensure that, with notice, interpretation services are made available to consumers, both for British Sign Language users and those for whom English is not their first language, as a matter of urgency. Firms must also make more effort to alert customers to the existence of such services, and how they can access them, and ensure that staff in all branches are aware of the existence of these services. The FCA should make it clear to financial services providers that such provision is expected of them under its treating customers fairly principle. This requirement would be even more explicit if firms had a legal duty of care to their customers. (Paragraph 140)

38.The Committee is concerned that almost three quarters of ATMs do not offer audio assistance. ATMs that do not have the capability to “talk” or ATMs that have a touch screen rather than physical buttons with Braille, are not accessible for visually impaired consumers. It is concerning that the RNIB (and other charities representing disabled people) have not been consulted on the roll-out of this new generation of ATMs. The European Union Accessibility Act which is due to come into force in April 2019 sets out what is required from ATMs to make them accessible. Given the UK Equality Act creates an anticipatory duty on providers to implement reasonable adjustments for consumers, the Committee expects ATM manufacturers and providers to make the adjustments set out in the EU Accessibility Act, irrespective of whether the UK remains in the EU while this Act is implemented. The Committee expects the Payment Systems Regulator to set out in response to this report whether it will mandate firms to do so. (Paragraph 147)

39.The roll out of credit and debit cards that are not tactile, and therefore offer no way for visually-impaired consumers to tell which way round they need to be inserted into ATMs, is a backward step by financial services providers. The Committee recommends that the FCA should mandate that all debit and credit cards have tactile markings as soon as possible. (Paragraph 148)

40.The roll out of touchscreen chip and PIN pads, which cannot be used by blind or partially-sighted customers, is another backward step by the payment infrastructure industry for those who rely on tactile buttons. It is unacceptable that partially-sighted customers might have to tell vendors their PIN in order to be able to pay with chip and PIN. As with ATMs, the European Accessibility Act sets out what is required to make payment terminals accessible. The Committee expects payment terminal manufacturers and providers to make the adjustments set out in the EU Accessibility Act. The Committee expects the Payment Systems Regulator to set out in response to this report whether this will be done. (Paragraph 149)

41.If the Post Office is to be used as a cash provider of last resort in communities where all other ATMs and bank branches have been closed, it must offer chip and signature in every Post Office branch in order to meet its obligations under the Equality Act to provide customers with reasonable adjustments. (Paragraph 150)

42.If firms designed their communications in the first instance to be accessible to all customers using a universal design approach, many of the difficulties faced by vulnerable consumers as a result of inaccessible communication from their financial services provider would be removed. (Paragraph 159)

43.All financial services providers should ask customers proactively what their preferred method of communication is and ensure that this is the primary way with which they are communicated in every instance. In addition, providers should make themselves aware of consumers’ changing preferences over time. (Paragraph 160)

44.The Committee recommends that the FCA acts to ensure that alternative methods of communication including Braille and Moon tactile fonts, large print and audio format are made available to consumers. In addition, the way in which to access these methods should be made clear, in large print, on all communications, including marketing material and terms and conditions. (Paragraph 161)

45.The Committee is concerned that the FCA has not chosen to set standards or issue guidance, and is instead relying on a principles-based approach to require firms to provide their customers with the communication channels they are entitled to by law. A principles-based approach, with no active enforcement, will not deliver the outcomes that vulnerable or disabled customers need. When its guidance is published, the FCA should set a minimum level of communication channels or methods that firms are required to offer to their customers, and include a clear requirement for firms to provide information in all the formats set out in paragraph 158. (Paragraph 162)

46.The European Union Accessibility Act will set standards of how accessible banking providers’ websites will need to be. Irrespective of the UK’s relationship with the EU, the Committee expects financial services providers in the UK to, at a minimum, meet the requirements set out in the Accessibility Act. The Committee expects the FCA to monitor compliance of firms with these requirements, and to work in regular collaboration with relevant organisations such as the Royal National Institute of Blind People to ensure that firms continue to meet legal requirements in the future, and that as new issues arise, the FCA is made aware of them. (Paragraph 163)

47.If the EHRC or the FCA is unable to enforce the provision of marketing or direct communication materials in accessible formats through the Equality Act, the Committee recommends that the Government amends the Equality Act to put in place a legal obligation on financial services providers to provide alternative methods of communication including Braille and Moon tactile font, large print and audio format for consumers, and give powers to the FCA to enforce such a regulation. (Paragraph 164)

48.The Committee welcomes the spirit of the efforts made by financial services providers who have begun to simplify and reduce the length of their terms and conditions. However, significant further steps are required to ensure that communications are accessible to all customers. The Committee recommends that all financial services providers reduce the length of their terms and conditions, and reduce the required reading age of all their communication material to that of the average reader, which the FCA told the Committee is that expected of an 11 to 12 year old. (Paragraph 169)

49.The Committee recommends that the FCA issues guidance to all financial services providers instructing them to ensure that all their communications with their customers—especially terms and conditions—are written in language that an average consumer can read and understand in full. The FCA should consider reviewing progress made by firms on simplifying their terms and conditions on a regular basis. The Committee will monitor FCA progress on this matter in future evidence sessions. (Paragraph 170)

Defining vulnerability

50.The Committee broadly welcomes the FCA’s work to define vulnerability and recognises that the FCA’s broad definition of vulnerability allows it to include not just those individuals that may be permanently vulnerable, but also those who are vulnerable due to their temporary circumstances. (Paragraph 181)

51.The FCA must set clear expectations of how financial service providers should treat vulnerable consumers under its definition, through the guidance it plans to publish across all sectors that it regulates. (Paragraph 182)

52.There are many reasons why consumers may not wish to disclose their particular circumstances to their financial services providers. This lack of disclosure may cause providers difficulties in identifying which of their customers require additional support. Nonetheless, it is beholden on firms to know their customers and create a culture from top to bottom where consumers feel comfortable discussing what their specific needs might be, in the knowledge that those needs will be met. Firms should design their interactions with customers to enable them to identify their customers’ vulnerabilities, and they must not use a customer’s lack of disclosure as an excuse not to provide the support required. (Paragraph 188)

53.If firms designed their products to be accessible to all customers using a universal design approach, many of the issues faced by vulnerable consumers—including their concerns over having to disclose their vulnerability—would be removed. (Paragraph 189)

54.The FCA guidance, when published, should provide firms with clear examples and principles of how they should go about identifying customer vulnerabilities. (Paragraph 190)

55.At present, training provided to staff is not uniform across financial services providers. Firms have a responsibility to ensure that all customer facing staff are adequately trained in how to assist vulnerable customers. (Paragraph 195)

56.The Committee recommends that within its vulnerable customer guidance, the FCA must outline the level of training that all frontline financial services staff are required to take. This training should be set at a high standard, that instructs staff in how to be empathetic and understanding when supporting vulnerable customers. In addition, staff must be aware of all of the disability adjustments and services that are available to their customers without fail. (Paragraph 196)

57.All retail financial services, no matter which sector of the industry they operate in, should be acting in their customers’ best interests at all times. If the FCA is unable to enforce such behaviour from firms under its current rule book and principles, the Committee would support a legal duty of care, analogous to that in the legal industry, creating a legal obligation for firms to act in their customers’ best interests. While a legally enforceable duty might still require customers to take their own legal action to seek redress against a provider, its very existence would remind providers of their duty to act in their customers’ best interests at all times. (Paragraph 210)

58.The FCA stated the feedback for its duty of care discussion paper would be published in early 2019 but it was only published in April. The Committee recommends that the FCA completes its consultation swiftly by Autumn 2019, with a clearly set out timetable of when changes to its rule book, principles, or legislation (if needed) will occur. (Paragraph 211)

Access to lower-cost credit

59.The Committee welcomes the Government’s announcement in the Budget to pilot a no-interest loan scheme and awaits the details of the proposed scheme with interest. When responding to this Report the Government should outline when these proposals will be brought forward. (Paragraph 215)

60.The Committee welcomes the Government’s work in undertaking a second post-implementation review of the effectiveness of its 2014 legalisation on rogue enforcement agents. The Committee will consider the results of this review when it is published, but expects to see increased protection for vulnerable consumers. (Paragraph 223)

61.Often, debt enforcement is a matter for local authorities. Many local authorities have already signed up to the Council Tax Protocol developed by Citizens Advice and the Local Government Association. The Committee recommends that local authorities sign up to the Protocol, and that the Government instructs them to do so. (Paragraph 224)

62.The Committee recommends that the Government amends the Consumer Credit Act 1974 and the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983 to update the required terminology and phrasing of payment request letters to a form of words that would be clear and understandable for an individual with a low level of literacy, and mandate the inclusion—with equal prominence to the demand for payment—of information within such requests of how an individual can seek help with their debts. In doing so it must take account of consultations with debt advice charities and other stakeholders. (Paragraph 226)

63.The Government’s Rent Recognition Challenge was designed to deliver a sufficient alternative to the aims of the Creditworthiness Assessment Bill in a timely fashion in the interest of consumers. However, the Committee has heard compelling evidence that including rental payments in credit checks would help individuals with “thin credit files”. The Committee recommends that the Government supports the Creditworthiness Assessment Bill through Parliament and expects the Government to confirm it will do so in response to this report. (Paragraph 232)

Published: 13 May 2019