Excluding poorest from basic financial services is scandalous, peers warn


The "scandal" of the poorest people being excluded from basic and fairly-priced financial services must be ended, a House of Lords committee has urged.

The UK's financial sector is failing customers who need it the most, with people being driven deeper into debt and distress by a "vicious circle" of high costs, according to the Lords Financial Exclusion Committee.

More than 1.7 million people in the UK have no bank account and two-fifths (40%) of the working age population have less than £100 in savings, the committee heard.

It said estimates suggest at least 600,000 older people are financially excluded while 51% of 18 to 24-year-olds regularly worry about money.

The committee highlighted the problem of the "poverty premium" which means those who can least afford it often end up paying the most to borrow money - in many cases because their choice of options is limited and costly.

It said that while a recent clampdown on the payday loans industry, which included a cap on charges, has been effective, similar restrictions should be introduced for other types of high-cost credit.

Urgent action is needed for new controls on "rent to own" products and unarranged overdraft fees, peers said.

The committee said the Financial Conduct Authority (FCA) remit should be broadened to give priority to tackling financial exclusion.

New rules should be introduced requiring banks to have a duty of care to customers, it said. The Government should also appoint a Minister for Financial Inclusion and report annually to Parliament on progress made towards tackling the problem.

The committee said the Government, the FCA and banks should "end the scandal of the poorest being excluded from even basic financial services and forced to rely on expensive and substandard products".

Baroness Tyler of Enfield, chairwoman of the Financial Exclusion Committee, said: "The UK financial services sector is a world leader which makes it doubly unacceptable that it is failing those who need it most.

"Too many people still have no bank account or cannot get access to basic or fairly-priced financial services. The poverty premium - where the poor pay more for a range of services from heating their home to accessing credit - contributes to a vicious circle driving people ever deeper into debt and distress."

Baroness Tyler said disabled customers are being failed by banks, adding: "We have heard of banks contacting deaf people by phone and sending written Pin numbers to blind people instead of using braille.

"Banks must review their own practices toward disabled customers to ensure they are making the reasonable adjustments already required of them by law. It is totally unacceptable that this situation persists, over 20 years after the introduction of the Disability Discrimination Act."

The report also highlighted an "accelerating trend" for banks to focus on online services at the expense of their branch network, potentially excluding older people and others who lack access to the internet. It said 53% of UK bank branches closed between 1989 and 2016.

More financial education could also help to reduce financial exclusion, the committee said. It said financial education should be introduced to the English primary school curriculum and Ofsted should assess the extent to which schools provide young people with financial knowledge and skills.

The Post Office has more physical outlets than the high street banks combined, and can offer banking services for 99% of current account customers in the UK. But awareness of this service is low and a publicity campaign should address this, the committee said.

Consumer group Which? has also urged action over "punitive" unarranged overdraft charges. A recent investigation by Which? found that borrowers needing as little as £100 could be charged up to £156 more by their bank than it would cost at a payday lender.

The FCA recently announced plans to put the high-cost credit sector under the spotlight.

James Taylor, head of policy and public affairs at the charity Scope, said: "It is completely unacceptable that in 2017 disabled people are still unable to use banking services due to access issues and inflexible policies."