Chapter 5: Financial exclusion and vulnerable groups
151.Financial exclusion can affect multiple different groups of people, at different stages of their lives. While the segment of the population that could, at some point in their lives, be exposed to exclusion is larger than might be expected, we heard that there were a number of groups for whom the risk of exclusion was particularly, and consistently, high.
152.Lloyds Bank told us that up to 40% of their customers had characteristics that could lead to them being considered to be ‘vulnerable’ customers.188 The Money Advice Trust said that:
“Vulnerable circumstances (including disability, mental health problems, terminal illness, bereavement and a wide range of other factors) can fundamentally change the way that consumers engage with financial products and services.”189
153.In this chapter we consider the effects of financial exclusion on some of these groups—namely older people, those with mental health problems and those living with disabilities—and make recommendations for practical change and improvements.
The risk of financial exclusion for older people
154.In mid-2015 there were 11.6 million people in the UK aged over 65 years of age, with 3.1 million of these aged over 80. These figures are projected to grow to 18 million and 6.3 million respectively by 2039.190 As people get older their financial position, needs and options can change. We were told that, while older cohorts of the population typically scored highly on measures of financial capability,191 they could also face challenges in accessing particular types of product. The provision of many types of insurance policy, for example, can be subject to restrictions or pricing policies that are weighted against older age groups.192
155.In addition older age groups are more likely to be affected adversely by the trend towards an increasing number of bank branch closures. Later Life Ambitions explained how this growing trend could affect older people:
“This has been exacerbated in recent years due to the closures of banks and post offices, the move towards more online based banking, poor transport in rural areas that prevents older people from travelling to their nearest banking branch and problems with physical health which prevent some older people from being able to travel easily or use online systems.”193
156.We were told that older age groups were more reliant on cash for daily purposes, budgeting and transactions, and that they placed a high value on face-to-face contact.194 The Finance Foundation told us that physical and cognitive changes could deter older groups from using technology, describing a survey which showed that one-third of people aged over 80 had either never used a cash machine or preferred to avoid them where possible. 4 in 10 cited physical issues limiting their capacity to use an ATM, perhaps due to sight problems or stiff fingers; a similar proportion were concerned about doing something wrong or being expected to be too quick.195
157.The growing number of bank closures does, therefore, have the potential to have a particularly exclusionary effect upon older age groups. The Economic Secretary to the Treasury highlighted the important role played by the Post Office in providing continuing access for this group, which was also emphasised in evidence from the Consumer Council.196 This is borne out by surveys which suggest that recognition of the financial services provided by post offices is highest among older age groups.197 We discuss the issue of bank closures, and the role of the Post Office, in more detail in Chapter Six.
158.The problems caused by diminishing physical and branch access, however, are exacerbated by the fact that this demographic is also more likely to suffer from digital exclusion, which was consistently highlighted in the evidence that we heard.198 At a basic entry level, the multitude of login details, passwords and PIN numbers required for online and mobile banking platforms can represent a significant barrier to engagement for older people.199
159.In addition, a lack of familiarity with the online environment also means that older people often need greater practical reassurance of their security in an online environment.200 We were also told that the abilities of older people could change as they age, and that those who were currently digitally skilled might not be so in future.201 There is limited provision for those experiencing memory loss to provide trusted carers with safe third-party access to accounts, short of full power of attorney. This means that people who want to retain overall control of their finances but need some assistance to do so have limited options.202
160.Some high street banks, including Barclays and Lloyds, have taken steps to develop the digital skills of customers who need support. The Barclays Digital Eagles scheme has seen over 15,000 staff trained to provide free technology advice to customers and non-customers; Barclays branches also run ‘tea and teach’ sessions to help people build confidence in using technology.203 Lloyds now has a network of 22,000 Digital Champions—members of staff who have made pledges to help individuals, small businesses and charities to get online—and also provides signposting for individuals to access online, phone and face-to-face support.204 These initiatives were praised in our evidence.205
161.The FCA has also sought to take action in this area, publishing research on the impacts of an ageing society in early 2016, with a new strategy to follow later this year.206 In addition, the FCA has also undertaken initiatives to bring together technology firms and larger financial services providers to look at ways in which technology might mitigate the impact of branch closures for some vulnerable customers.207
162.Further measures, though, are required to support access to digital services for this group. The Finance Foundation told us that, while there are some business, legal and regulatory incentives for firms to act, “at a certain point it has to be recognised that the market is unlikely to provide a full solution.”208 They went on to suggest that the Government and regulators should consider how further innovations in age-friendly design of products, services and technology might be encouraged. This could include the provision of regulatory ‘safe spaces’ to develop, innovate and leverage technology to support older people in staying financially included.209
163.Age UK, in a similar vein, suggested that financial technology (FinTech) solutions should be developed and tailored for older people. They suggested that these would need to be radically simplified in terms of interface, use and ‘passing security’, while also noting the paramount need for security to be maintained.210
164.Older people are at high risk of financial exclusion not least as a result of the growing number of bank closures, and moves towards a greater dependence on online and mobile banking. We welcome initiatives undertaken by the FCA, and some high street banks, that seek to address this situation.
165.In part, the needs of older age groups can be served by the Post Office network; we consider the role of the Post Office further in Chapter Six. It is, however, clear that further measures to support the needs of the older age group are required, and that the market alone will not meet these needs.
166.We recommend that the Government and regulators should work together to develop an approach to promote further innovations in the provision of online and mobile banking services to older people. The central objective of this initiative should be to develop new platforms and apps that can simplify access, security and interface in an age-appropriate way, while maintaining the high level of integrity and security required to reassure and encourage take-up among the older age group. (Recommendation 8)
The relationship with mental health
167.People who are living with mental health problems are particularly likely to be victims of financial exclusion.211 We were told that these people were more likely to be out of work or living unstable lives which were beyond their control, meaning that they face multiple hardships due to lack of access to services, including financial services.212
168.There is a two-way relationship between financial exclusion and mental health.213 The experience of facing up to financial exclusion or dealing with financial distress can have a negative impact on the mental health and wellbeing of individuals.214 This can, for example, be the result of strains placed on relationships by money worries, stress caused by the actions of creditors, negative effects to wellbeing caused by going without essentials, or restrictions on social activities due to lack of funds. It was suggested that many people in financial difficulty report anxiety, worry, insomnia and depression which can be attributed directly to their financial situation.215
169.At the same time, those who are living with mental health problems can find that their condition affects their financial behaviour, in ways that are often to the detriment of their long-term financial inclusion. We received extensive evidence on such behaviours. The Money and Mental Health Policy Institute told us that mental health problems have a substantial and wide-ranging impact on the ability of consumers to navigate the market for financial services, including the ability to choose and use appropriate products to manage their money.216 They went on to describe how mental health problems can prevent people from controlling their finances as a result of being “in a state of denial, phobic about finances or disengaging completely from contact with creditors and financial services providers, for example by refusing to open the post, answer the telephone or door, or check bank statements.”217
170.While disengagement can be one aspect of this relationship, another effect can come in the form of excessive spending during manic episodes, leading to extensive bills and debts which an individual is then unable to pay. This is to the detriment of their long-term credit rating and access to financial services. We were provided with the following example, drawn from a survey in March 2016:
“I had a period of mania in 2012–2013 and got into over £10k worth of debt. I ended up being hospitalised and my dad freezing my bank account. It was all a horrendous experience but the aftermath is worse. Although many debtors have written off the debt my credit rating is shot to pieces and I can’t even get a current account in my own name”.218
171.Furthermore, we were told that people living with mental health problems were often vulnerable to forms of financial exploitation. It was noted that the chaotic lifestyles of the individuals concerned could lead to them living in temporary accommodation, where they were susceptible to being taken advantage of by other residents.219 It was suggested that online retailers typically sent emails and communication to potential customers during the night, when lonely or isolated individuals might be at their most vulnerable.220 In a similar vein, the preponderance of gaming channels being broadcast late at night was also highlighted as predatory behaviour which might target vulnerable customers:
“If you turn on your TV at 3am, pretty much all that you will find is gaming. Ofcom takes the view that hardly anybody is watching between midnight and 6am, so even the public sector broadcasters are allowed to broadcast gaming. But who is watching between midnight and 6am? Of course, there will be some shift workers, but there will also be people suffering from insomnia, people who are drunk, people who are alone—actually, quite a vulnerable consumer group. We need to think carefully, I think, about how we might restrict TV shopping and gaming that is targeted specifically at people who are at their most vulnerable.”221
We believe that exploitation of this nature is unacceptable, and merits further attention from regulators and the Government.
172.While these interactions are complex in nature, and undoubtedly variable across a diverse demographic, we believe that there are some relatively straightforward and pragmatic solutions available. We were told that moves towards open banking, and the greater availability and accessibility of data—particularly transaction data—would present new opportunities for people to take control of their finances.222
173.Martin Lewis told us that ‘control options’ should be available to customers, to allow them to manage their money more effectively and to mitigate against the potentially devastating long-term effects of manic or crisis spending:
“What level of control do you want put in place on your account? You can have a strong control option that would give you a cut-off at certain levels of expenditure or allow somebody else to come in. I do not think that the financial services institutions are yet in a position to be able to do that under the regulations that we have.”223
It was suggested that these options could include some or all of the following:
- Nudge-type notifications of deviations from regular patterns of behaviour.
- Restrictions from spending at certain merchant categories.
- 24 hour (or other) delay before processing large transactions.
- Bank accounts and/or pre-pay cards with third party:
- Joint control;
- Partial joint control (such as authorisation of large transactions and/or particular merchant category code types);
- View-only privileges; or
- Notification of specific behaviours only (such as gambling or large transactions).224
174.Many of these product features are, in fact, already available in the marketplace. Service providers already undertake monitoring of accounts to check for unusual activity or potentially fraudulent patterns of spending, providing notifications to customers where appropriate. It is possible to provide third-party monitoring and access; we received evidence from SourceCards which detailed the support and mentoring that they give to card holders who were previously financially excluded. This includes the option to allow account holders to give a sponsor, case worker or mentor remote access to their account to assist with budgeting, buying essentials and paying for goods.225
175.The technological barriers to the development and implementation of control options are, therefore, potentially limited. We believe that banks and financial services providers should do more to provide support, when requested, to customers experiencing mental health problems.
176.We recommend that the Government should work with the financial services industry and the FCA to develop and introduce a wider range of ‘control options’ for those customers who may experience mental health problems. Such options would allow people to opt in voluntarily to a series of controls which limit the potential for financial harm. (Recommendation 9)
Disability and financial exclusion
177.We were consistently told that disabled people were likely to be disproportionately affected by financial exclusion; the relationship between disability and poverty was also highlighted.226 The Equalities and Human Rights Commission (EHRC) told us that 30% of people in families containing a disabled person were living in poverty. They went on to explain that disabled people experienced a wealth and asset gap as compared to the rest of the population, with lower incomes and extra costs having a negative impact upon their capacity to save.227
178.Scope told us that the extra costs experienced by disabled people amounted to approximately £550 a month. They suggested that the additional costs of disability are incurred in three main ways:
- Paying for specialised goods and services. This may include one-off, but expensive, purchases, such as assistive technology or mobility aids.
- Greater use of non-specialised goods and services. For example, someone with limited mobility may have to spend more on energy to keep warm, while a wheelchair user may have to use taxis more often if public transport is inaccessible.
- Spending more on non-specialised goods and services. This may include costs such as higher tariffs for accessible hotel rooms, or having to pay higher premiums for insurance products.228
The costs of living with ill-health or serious illness were also emphasised in the evidence that we received. Macmillan Cancer Support told us of research which suggests that 4 out of 5 people with cancer are affected financially by their diagnosis, and that such individuals are on average £570 a month worse off as a result.229
179.An element of support is provided for some costs associated with disability, in the form of Disability Living Allowance (DLA) or Personal Independence Payment (PIP). DLA is in the process of being replaced by PIP. We were told that transition between the two benefits, however, had led to some disabled claimants losing their entitlements.230
180.We also heard that disabled people were more likely to experience problem debt issues.231 StepChange told us that 9.1% of their debt advice clients were in receipt of Employment Support Allowance or Incapacity Benefit, while only 3.9% of the population at large are in receipt of these benefits.232 Housing associations noted that those tenants who were in receipt of Employment Support Allowance were likely to be in arrears by the end of the month.233
181.There are a number of issues which limit access to financial services for disabled people. Concern was expressed about the closure of bank branches, and the impact upon vulnerable customers who might be more reliant on face-to-face contact with branch staff; we were told that almost half of disabled people, when surveyed, had said that they would prefer to receive advice in person, rather than via phone or email.234 Despite this, one in eight disabled people had found it difficult to physically access their bank or building society during the past 12 months.235
182.In this context, it is also important to note that levels of internet usage and access are lower among the disabled population. Only 64% of disabled people have access to the internet, compared to 86% of non-disabled people.236 The decline of bank branch networks, and moves towards greater reliance on online banking, therefore pose a particular challenge for this part of the population.
183.Technologies and products which have become a familiar part of day-to-day financial services for many can also present difficulties. The problems experienced with using PIN codes by those living with disabilities were consistently emphasised;237 we were told that such groups could also experience difficulties with security questions that were sometimes used to access banking services.238 The insistence, by some banks, upon using an ATM to activate new credit or debit cards was highlighted as posing issues for those with limited mobility. We were also told of cases where banks insisted upon contacting deaf customers by telephone, and seemed unable to provide alternative means of contact suitable to the needs of the customer.239
184.Blind customers can experience a number of difficulties in securing adjustments to services and products from providers. One particular issue concerns PIN numbers, which are typically sent in a format that is unsuitable for blind customers; we were told that problems had been encountered when suitable alternative formats—such as Braille—were requested from banks.240 In addition, blind customers might prefer not to use contactless credit or payment cards, due to concerns about fraud or ‘double payment’; we were told that requests for banks to send cards without this functionality had not always been successful.241
185.Requests for alternative formats are particularly important when customers need to read and understand information regarding the financial services that they are using. We were told that such information was, all too often, sent in standardised formats, and that banks found it difficult to cater to the diverse needs and nature of the disabled population.242 The EHRC noted that changes to terms and conditions, or notices of costs incurred from an overdraft were often communicated online or via letter, and that this was not always suitable for disabled people.243 Mencap suggested that banks could do much more to provide accessible information—such as Easy Read formats—for those with learning disabilities.244
186.Initiatives currently being undertaken across the sector are likely to lead to improvements in some areas of practice. The Competition and Markets Authority, for example, told us that early work on the Open Banking Standard should lead to the publication of much better information about the location and physical accessibility of ATMs.245 Nationwide Building Society also set out some of the good practice that they had undertaken in order to serve disabled customers better:
“Those with disabilities are particularly at risk where providers fail to acknowledge the need for reasonable adjustments. At Nationwide, we ensure that all our digital platforms are accessible, that our branch network is optimised to welcome customers with disabilities and that our products and services are available via a range of channels to give people choice as to how they do business with us. We also train our employees to understand disability and how to respond to customers’ needs.”246
187.While we welcome this good practice we believe that, across the sector as a whole, much more could and should be done to improve the level of service provided to disabled people. The Disability Discrimination Act 1995 (DDA) was the first UK statute to make it unlawful for employers and suppliers of goods and services to discriminate against disabled people. The DDA also introduced into legislation for the first time the concept of ‘reasonable adjustment’.247
188.Subsequently, the Equalities Act 2010 brought together provisions that were under four different statutes in order to consolidate, simplify and amplify provisions that related to equalities. The Equalities Act 2010, therefore, provides a current statutory requirement for service providers to make reasonable adjustments when communicating with customers; supporting guidance to financial services providers underlines the central importance of this duty.248
189.We were told, however, that banks are failing to make reasonable adjustments for disabled people and that “requests can be met with outright refusal or long-winded inefficiency, both of which are extremely frustrating.”249 This view was echoed by Mencap,250 who told us that reasonable adjustments that could be made often are not, and by the EHRC, who told us that they had exercised their legal enforcement powers on a number of occasions in respect of discriminatory service by several financial institutions to disabled customers. They suggested that these cases “highlight the recurrent failure of the financial industry to make reasonable adjustments.”251
190.We believe that this situation is unacceptable, and that such reasonable adjustments are long overdue. It is over 20 years since the concept of reasonable adjustment was first introduced into statute in the Disability Discrimination Act 1995; we would hope that, by the time the Act reaches its 25th anniversary in 2020, financial services providers will have made the adjustments necessary to ensure that their services can be accessed by disabled people.
191.We believe that banks and financial services providers should be serving disabled customers by making reasonable adjustments to their services, as required by primary legislation. We are concerned that such adjustments—which are central to improving and increasing accessibility—are not currently being implemented with the appropriate degree of commitment and vigour.
192.We recommend that the Government, working with the FCA and the British Bankers’ Association, should carry out a review of reasonable adjustment practices for disabled customers. The review should identify areas of good and bad practice, as well as areas where current provision needs to be improved. The initial review should be published within 18 months of the publication of this Select Committee report. Subsequently, and within the lifetime of this Parliament, a timetable identifying target dates for the delivery of improvements should be set out, monitored and implemented. (Recommendation 10)
192 Supplementary written evidence from Financial Services Consumer Panel (FEX0099) and Age UK (FEX0094)
195 Ibid.
198 Written evidence from Money Advice Trust (FEX0047), Demos (FEX0063), Gateshead Council (FEX0046) and supplementary written evidence from Age UK (FEX0094)
202 Ibid.
209 Ibid.
216 Ibid.
217 Ibid.
219 Written evidence from Citizens Advice Redcar & Cleveland and Coast & Country Housing Ltd (FEX0048)
221 Ibid.
226 Written evidence from Shelter (FEX0056), The Advice Shop (FEX0039), Mencap (FEX0060) and MAS (FEX0062)
230 Written evidence from Inclusion London (FEX0067) and Merton Centre for Independent Living (FEX0003)
235 Ibid.
236 Ibid.
237 Written evidence from Merton Centre for Independent Living (FEX0003), Inclusion London (FEX0067) and Mencap (FEX0060)
240 Ibid.
241 Ibid.
247 The genesis and history of legislation in this area is considered in more detail in the report of the Select Committee on the Equality Act 2010 and Disability, The Equality Act 2010: the impact on disabled people (Report of Session 2015–16, HL Paper 117)