The Office of Fair Trading has launched an enquiry into how the financial services industry meets the needs of vulnerable consumers. Announced on December 16 and due to report during the summer, the OFT will particularly examine why one in five adults do not have a bank account, seen as the gateway to acquiring basic financial services. Other issues will include the cost and suitability of services covering banking, credit, insurance and savings, and sources of advice. People covered by the review include the elderly and disabled and those with low educational attainment or with learning difficulties. Contact OFT on 0171 211 8000 (www.oft.gov.uk)
SHORT-SIGHTED BANKS
Banks must improve their treatment of customers who experience financial hardship if the industry is to meet the requirements of the recently revised code of banking practice. In a study published on December 17, In the Bank’s Bad Books, the National Consumer Council says some financial institutions have broken the original 1994 code by taking a ruthless and short-sighted approach to customers in difficulty, so exacerbating problems which could be solved with a longer term view. The NCC wants the new Financial Services Authority to make adherence to the revised code a licensing requirement, with sanctions where it is broken. Contact NCC on 0171 730 3469
CHANGING WORLD OF WORK
The RSA’s continuing ‘Redefining Work’ enquiry produced a new discussion paper during December, Financial Services and the Changing World of Work. Sponsored by KPMG, it argues that the industry is not facing up to the implications for savings and pensions of flexible and part-time working; despite being a service industry, it thinks in terms of products not people. Among the recommendations are more support for education and a call for financial management to become part of the National Curriculum. Contact Valerie Bayliss, RSA, on 0171 930 5115 (www.rsa.org.uk)
FINANCIAL LITERACY CAMPAIGN
NatWest Group has issued the second ‘update’ newsletter on its campaign for financial literacy. The aim of the initiative in the run up to the new millennium is to promote the skills and confidence which people need to plan and manage personal financial matters. Recent activities include a joint conference with the Qualifications and Curriculum Authority on financial literacy education and research by the think tank, Demos, on the impact of changes in social and personal values. Contact Sue Skinner, NatWest, on 0171 726 1255
EDUCATING CONSUMERS
A new grouping of consumer, education and trade organisations was formed on January 21 to devise a national strategy for consumer education. The National Consumer Education Partnership has developed an action plan to promote the skills needed to cope with fast changing markets and products. The launch meeting was hosted by BT. Contact Frances Harrison, NCEP, on 0171 881 3035
Comment
In the last issue of Community Affairs Briefing, we reported on calls from not-for-profit pressure groups for greater regulation of the financial service industry. They wanted to make sure that vulnerable customers can get access to essential products like a bank account. We argued that the industry itself should become more innovative, finding profitable ways to serve `marginal’ markets, and that the only compulsion should be to report openly what they do. But if they did not, we warned regulation would follow.
Now, in yet another example of the power of NGOs to set the agenda, we report on public agencies being forced to respond: the OFT is a regulator with statutory duties to take action while the NCC was set up by government to champion the consumer interest. When the whole industry is pilloried, it must be galling for companies like NatWest, whose community affairs programme is indeed tackling financial literacy even if its mainstream business has yet to respond fully.
Two lessons emerge. First, for individual companies: big national firms cannot simply ignore consumers who have been marginalised by the competitive modern economy. Find a way to address their needs, evaluate what you do and tell the world about it. Second, for whole industries: you need to mobilise and work together to tackle social problems; individual effort will be slow to change overall public perceptions. Where is the financial services equivalent to alcohol’s Portman Group, for example? Too many trade associations put all their efforts into resisting greater industry regulation alone, not organising an appropriate sector-wide approach. It’s time for collective action on social responsibility.
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