House of Lords report calls for increased FCA powers to prevent financial exclusion

House of Lords report calls for increased FCA powers to prevent financial exclusion

The House of Lords Liaison Committee has published its third follow-up report, ‘Tackling financial exclusion: A country that works for everyone?’ The report urges the government to introduce a requirement for the Financial Conduct Authority (FCA) to establish a statutory duty of care that banks and other financial services providers must operate toward their customers. The Committee recommends that this replace the current requirement to ‘treat customers fairly’ which it deems insufficient. It also recommends that the FCA be given a financial inclusion objective.

The report examines the progress which has been made by the government and key stakeholders on the implementation of some of the recommendations made by the Select Committee on Financial Exclusion in its report, also titled ‘Tackling financial exclusion: A country that works for everyone?’ It recommends that a clear government strategy and increased FCA powers are brought forward in order to stop people experiencing financial exclusion.

The Committee notes that over half of the population are classed by the FCA as having characteristics of financial vulnerability. This issue has been exacerbated by the coronavirus (COVID-19) pandemic, with 14.2 million people in the UK now estimated to have low financial resilience—characterised by over-indebtedness or with low levels of savings or low or erratic earnings. Types of financial exclusion can include: not being able to open a bank account; not being able to access financial services due to bank branch and ATM closures; and not being able to access affordable credit.

Chapter 3 of the report reiterates the Committee’s recommendation that the government should expand the remit of the FCA to include a statutory duty to promote financial inclusion as one of its key objectives. It argues that government leadership of the financial inclusion agenda must be supported by proactive regulation. The Committee concludes that the work of the FCA in this field is limited by the objectives defined in its statutory remit. The Committee reiterates its recommendation that the Financial Services and Markets Act 2000 (FSMA 2000) should be amended, in order to introduce a requirement for the FCA to make rules setting out a reasonable duty of care for financial services providers to exercise towards their customers.

The Committee also recommends that proposed legislation to protect access to cash should be brought forward without delay. It recommends that the government consider giving the FCA overall responsibility to meet the cash needs of consumers and SMEs, and recommends that this is enshrined in law as part of the statutory duty of care. Among other recommendations, the Committee further calls on the FCA to monitor and make recommendations to banks regarding inclusive design to enhance digital inclusion.

Source: Government strategy and increased FCA powers needed to prevent financial exclusion

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