As demonstrated by the Terms of Reference, the Financial Inclusion Taskforce have been invited by the Treasury to consider solutions to the problem of financial exclusion in three key areas: access to banking, access to affordable credit and access to free face-to-face money advice. The Taskforce considers clarity over the definition of the problem and identification of the objectives for solutions to be an important element of its role. With this in mind, the Taskforce has drawn up the statements below to provide a framework within which to consider solutions.
The Financial Inclusion Taskforce recognises that operating without a bank account can lead to significant costs for individuals and families. The Taskforce recognises the progress made by the banks over recent years, but considers that there remains more to be done to ensure that appropriate mainstream banking services are available and that these services meet the needs of low-income groups. The Taskforce would like to see everyone who could reasonably benefit from transactional banking services able to do so. Such services are accepted by the majority of people as a basic service of everyday living. The Taskforce wants to ensure that everyone has the option of accessing these services and the appropriate information to make an informed decision on whether or not to do so.
The Financial Inclusion Taskforce recognises that for people on low incomes, credit can often be necessary for day-to-day financial management. The Taskforce would like to see a range of accessible credit products supplied in a competitive market, at fair and transparent rates, where consumers have the appropriate information and capability to make informed borrowing decisions. The Taskforce recognises that, even when these conditions are met, providing low-value loans to low-income groups may result in higher costs and therefore higher prices for some. The Taskforce is investigating additional measures, whether by government or by providers of credit products, that may reduce these costs.
The Financial Inclusion Taskforce recognises that, for many people on low incomes, credit can be a useful tool in managing household expenditure, and that most people are able to keep borrowing under control. However, some people have difficulty managing their borrowings and encounter problems meeting credit commitments or paying households bills. The Taskforce notes that people with the highest debt as a proportion of income are concentrated at the lower end of the income scale. Those at the bottom end of the income scale are also more likely to experience difficulties accessing mainstream products such as bank accounts and mainstream credit. The Taskforce would like to see money advice available to all those who seek it and delivered in ways that meet their needs.
The Financial Inclusion Taskforce recognises that the problem of financial exclusion is not solely one of availability of products or practices of providers. It recognises the need to stimulate demand for appropriate banking services and credit products amongst financially excluded groups, and to equip individuals to make the most appropriate choice for themselves. It recognises that in order to do this, individuals may benefit from assistance with understanding the options available to them, the potential benefits of different products, and the requirements of accessing products. Practical assistance in, for example, applying for a bank account may also be appropriate. This kind of ‘informed choice’ process may be usefully facilitated through organisations such as:
- those with which individuals are already in touch, such as housing associations or Job Centre Plus;
- others which individuals already trust, such as voluntary sector organisations or community groups; or
- central or local government.
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