Consumers’ access to financial services to be probed by MPs
An inquiry into consumers’ access to financial services has been launched by MPs amid concerns some vulnerable customers are finding it increasingly difficult.
The Treasury Committee will scrutinise whether certain groups of people are excluded from obtaining a basic level of service from providers.
It will also examine whether vulnerable consumers pay more for financial services products.
Nicky Morgan, who chairs the Treasury Committee, said: “Vulnerability, as defined by the FCA (Financial Conduct Authority), is where someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.
“With customers expected to take more responsibility for their financial planning and resilience, bank branches closing and the number of free-to-use ATMs falling, it’s becoming increasingly difficult for vulnerable customers to access certain financial services.
“The committee will examine the practicality of the FCA’s definition, the effectiveness of attempts by financial services providers to prevent increased financial exclusion and whether a premium is placed on products such as travel insurance for vulnerable consumers.
“As part of this inquiry, we’ll be holding sessions outside of Parliament to hear from vulnerable consumers who have interacted with financial services providers.”
Questions the committee will consider include how financial services firms define vulnerability.
It will look at the training in place at financial services firms in relation to vulnerable consumers and consider the merits of having a “duty of care” for financial services providers and examine whether this would increase protection for vulnerable customers.
The committee will also examine which customers are most disadvantaged when bank branches close and consider whether there is evidence to suggest that bank branch closure leads to increased financial exclusion.
It will also evaluate the impact of reducing the number of free-to-use ATMs on vulnerable consumers.
Other aspects of financial services the inquiry will look at include how firms ensure their information is accessible to people with low literacy levels; the use of the Post Office’s services in areas where bank branches have closed; the systems in place for power of attorney at financial services providers, and whether certain barriers which lead to people not having a bank account.
The inquiry will also examine whether vulnerable consumers pay prohibitively more for certain financial services products, including travel and home insurance.
The committee also wants to know how technological innovation could help those who cannot easily access physical financial services branches.
Tom Selby, senior analyst at financial services company AJ Bell, said while some people may be more obviously vulnerable, others may be harder to identify.
He said: “Many people suffer for long periods with debilitating depression, for example, without even their closest family knowing.
“Tackling vulnerability therefore cannot be dealt with by any one company or industry in isolation.
“It requires broad collaboration between firms, regulators, politicians, charities and customers themselves.
“Companies across financial services need to build understanding of vulnerability into their respective cultures, sharing best practice and continually reviewing and improving the processes put in place to protect customers.”
In 2017, the National Audit Office (NAO) said that around three million disabled people have been denied insurance or charged extra because of their condition.
The NAO said an estimated eight million people were over-indebted and an estimated 310,000 households may be using illegal money lenders because of limited or no access to legal credit.
Gareth Shaw, Which? money expert, said: “Rapid changes to the financial landscape risk excluding a significant amount of people from access to vital financial services and cash.”
He said ongoing closures “can devastate communities”, and continued: “The financial services provided by firms must cater to the needs of all consumers.”