Parliamentary Commission on Banking Standards

Baroness Coussins Excerpts

Thursday 8th September 2016 Grand Committee

[Baroness Coussins (CB)]

My Lords, I, too, am grateful to the right reverend Prelate the Bishop of St Albans for tabling this debate. I declare my interest as president of the Money Advice Trust, the charity which helps people across the UK to tackle their debts and manage their money with confidence. Among other things, the trust runs the National Debtline, which last year provided free advice to almost 400,000 people over the phone or online.

In this debate about a report which focuses on issues to do with governance, professional standards, structure and regulation, I want to emphasise how important it is that we do not lose sight of the interests of the consumer. An important aspect of the debate on banking standards is, of course, the question of trust in financial services. That was undoubtedly damaged in the wake of the financial crisis and, nearly 10 years on, there is still some way to go before this trust is rebuilt.

Key to rebuilding this relationship is treating customers fairly; in practice, that means on the ground, at the point of service. I offer two observations. The first is the need, as others have already said, to embed the fair treatment of customers into the culture of financial services and to make further improvements to competition as a means to this end. Several steps have been taken in recent years to improve the way in which customers are dealt with by financial service providers, including the FCA’s requirement that all firms must be able to show that consistently fair treatment is at the heart of their business model, as laid out in its “fair treatment of customers” outcomes.

Similarly, the Parliamentary Commission on Banking Standards’ recommendation on the need to improve competition in the retail and SME sectors paved the way for the CMA’s recommendations last month. These included making account switching easier and introducing open banking data sharing, which could unlock huge benefits for consumers by harnessing new technology to help them manage their money. Both these measures are welcome and will improve outcomes for consumers.

However, of even greater concern to many people, and a far bigger barrier to trust in financial services, are the high overdraft fees people find themselves being charged by their bank. The CMA’s announcement that banks will have to place a monthly cap on overdraft charges is welcome, although with customers currently paying £1.2 billion a year, it is debatable whether anything less than an industry-wide cap will make the difference that we need to see. From the consumer’s perspective, getting this right will be a significant part of restoring the trust in the UK banking sector.

My second observation is that improving fairness and trust requires more to be done to focus on one group of customers in particular: those in vulnerable circumstances. For several decades, vulnerable customers have been overlooked, with their treatment by financial service providers varying hugely in the absence of concrete guidance and policy. Whether the vulnerability in question relates to mental health, bereavement, terminal illness or any other factor, the way that these customers are treated by their bank or credit card company can make an enormous difference to their situation, either positively or negatively.

The Money Advice Trust has been closely involved in the work of the Financial Services Vulnerability Taskforce, established by the British Banking Association in early 2015 to address how financial institutions can improve the experience of such customers. The task force brought together major banks, building societies, charities and consumer groups, building on the FCA’s previous work on consumer vulnerability in order to push this issue up the agenda of financial services firms. The good news is that the industry is responding well in addressing the findings of the task force, and vulnerability is now included more comprehensively in the new standards of lending practice, which bring the achievement of improved customer outcomes for vulnerable consumers within the Lending Standards Board’s monitoring regime.

Of course, there is still much more to be done, including better collaboration between different sectors, to make vulnerable customers’ engagement with firms as straightforward as possible. Nevertheless, it is important to recognise that real progress is being made in this regard. I ask the Minister, following on from the task force’s valuable work, what specific lessons Her Majesty’s Government think could be learned by public sector bodies, especially those engaged in debt collection, in respect of their treatment of people in vulnerable circumstances.

In conclusion, I emphasise that improving the treatment of customers—in practice on the ground, not just in the fine words of policy documents—and paying particular attention to vulnerable customers will be key to resolving the lack of trust in banking that the Parliamentary Commission on Banking Standards was set up to address. I hope the Government and regulators will keep up the pressure on this crucial aspect of the agenda.