Banks failing the poorest, warn Lords

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 per cent) 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 per cent 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.”