FSA 'not adequately addressing' financially excluded

The Treasury Committee has raised concerns the Financial Services Authority’s national strategy for financial capability does not adequately address the needs of the financially excluded.

In its latest report on financial inclusion, the committee says it welcomes the “limited steps” the FSA has taken to improve financial capability, but it recommends the FSA sets and achieves targets to reach individuals.

It states: “Reaching the financially excluded will require much more active engagement rather than just distributing leaflets or putting information on a website.”

The committee believes the FSA is the right body to coordinate the national strategy, but it says the FSA has made little progress in identifying and drawing extra funding for financial capability work or developing a wider funding strategy.

It recommends that when conducting cost-benefit analyses, the FSA examines and reports on whether regulation could reduce access among low-income groups, for example by forcing providers out of the market.

The report also states long-term work aimed at promoting financial capability should take place alongside efforts by the financial services industry to make their marketing clearer for consumers.

It says: “The current documentation, such as the key features document, is confusing for consumers. We recommend that the FSA attaches a greater priority to its work to simplify the disclosure regime and ensure that financial services companies provide consumers with simple and clear information.”

Teresa Perchard, director of policy at Citizens Advice, says she is pleased the committee has called for the funding for debt advice not to end in 2008.

She states: “Citizens Advice are currently recruiting 370 debt advisers to help deal with the 1.4 million debt problems already received in bureaux. We expect that figure to rise next year and would welcome an early signal from the government that they will continue this funding beyond 2008.”

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