Financial Inclusion Centre develops new online automated Credit Union loan facility

Just in time for Christmas, last week saw the launch of the Wee Glasgow Loan (, a new short-term loan product offered by Pollok Credit Union that looks to provide a fair and more affordable alternative for the 100,000 Glaswegians that are thought to be borrowing annually from high cost lenders such as payday loans, door-step lenders, pawn brokers and rent-own-firms.

The Financial Inclusion Centre (FIC) has spent the last few months working with Pollok Credit Union and Glasgow City Council to develop the new online automated platform. By integrating with the credit union’s own membership information and linking directly to credit reference data, it can offer instant loan decisions for applicants and straight through processing of loan disbursement and collection of repayments. For the credit union, this not only helps it meet the growing customer expectations of modern borrowers with 24/7 availability, simple applications and swift decisions and money transfers, but also drives its lending levels and acquisition of new members as well as reducing the costs of loan administration through the automation of much of the process.

With over 1,000 loan applications in the first 7 days, the benefits of the Wee Glasgow Loan has already attracted significant interest across the city. Yet, with an estimated £57 million borrowed from high cost lenders each year in Glasgow, there is still a long long way to go. The Wee Glasgow Loan itself offers applicants the opportunity to borrow up to £400 (and £600 for subsequent loans) and choose to spread the repayments over 1 to 12 months. The interest is charged at just 2% per month or 26.8% APR – making it much more affordable than the costs charged by typical payday lenders and other high cost borrowing channels.

This is the third credit union that the Financial Inclusion Centre has worked with to adopt the automated lending platform originally launched by London Mutual Credit Union ( and subsequently with Leeds Credit Union ( By working in partnership, these credit unions benefit from the economies of scale of sharing the ongoing operating costs for the systems and obtaining lower unit costs on credit searches, transfers and collections. Yet, each credit union can brand and tailor the terms of its individual loan products to match it own requirements as well as adjusting its risk appetite.

Since going live with the online lending platform in February 2012 (to June 2016) – London Mutual Credit Union has approved 23,261 short-term loans with a total value of £6,305,612 with delinquency level of just £109,546 (1.7% of total loans). A 12 month evaluation report of the LMCU payday loan product can be found here:

Can payday loan alternatives be affordable and viable – Summary Report 

Can payday loan alternatives be affordable and viable – Final Report

For more information on the automated lending platform please contact Gareth Evans at Financial Inclusion Centre on

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The future of NEST, Regulating defined benefit pension schemes

NEST – Evolving for the future

The Financial Inclusion Centre has responded to the DWP’s call for evidence on the evolution of NEST. We are big supporters of NEST as a good example of how collective provision can introduce real value into complex, failing markets such as pensions where the individual, market-based approach fails to work.

NEST was set up to provide a good value, trusted means of helping consumers accumulate assets for retirement. We strongly support the idea that NEST should also provide a default option for those trying to provide an income in retirement – the decumulation phase. The introduction of the misguided pensions ‘freedom and choice’ reforms will result in consumers being exposed to greater market, longevity, and misselling risks and higher costs/ worse value when trying to generate an income in retirement. It is critical, therefore, that NEST is able to provide a beacon of good value and trust in the decumulation phase of retirement.

The submission can be found here: financial-inclusion-centre-submission-nest-evolving-for-the-future

Regulating defined benefit pension schemes

The Centre also responded to the Work and Pensions Select Committee Inquiry into Defined Benefit Pension Schemes

Resolving the problem with pension scheme deficits requires some tough decisions by employers and regulators. One thing that can be done to address the issue is to reform the regulatory framework for defined benefit pension schemes. We made three main high level recommendations for improving the regulatory framework:

  • The prudential regulation of defined benefit schemes should be tightened up;
  • Conduct of business regulation as it applies to defined benefit schemes should be toughened up; and
  • Linked to the previous point, the ‘architecture’ of pension regulation should be redesigned and clarified so that we have a more explicit ‘twin-peaks’ regulatory architecture.

The submission can be found here: financial-inclusion-centre-submission-work-and-pensions-defined-benefit-pension-schemes


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Brexit seminars

‘Brexit’ could have serious implications for consumer protection and how financial markets are regulated in the UK. How much UK consumer legislation and regulation is affected will depend on which form Brexit takes, which could range from ‘Brexit-lite’ to a ‘hard-Brexit’. Risks would mainly arise if access to the single market in financial services is lost or severely curtailed. Remaining in the single market would require most, if not all, of current EU-derived law to stay in place. Depending on the outcome, we see two key risks emerging.

Firstly, the financial sector already argues disingenuously that the current system of financial regulation stifles innovation and competition. Industry lobbyists will capitalise on the opportunity provided by Brexit to lobby for deregulation and a weakening in consumer protection in financial services.

Secondly, if access to EU markets end up being reduced, the City of London will seek to offset this by attracting additional business from other international financial markets. On the face of it, this could be beneficial for the UK economy. But, the economic and social costs of the 2007/08 financial crisis provided a painful reminder of the risks associated with an over-reliance on financial services. The UK financial sector is already one of the biggest in the world and if the UK’s exposure to international financial markets is increased, this could further threaten the stability of the UK financial system and resilience of the wider economy.

There are big choices to be made and well-resourced financial services industry lobbies are already actively trying to influence the course of Brexit. It is important that consumer groups and civil society understand the potential consequences of Brexit.

With this in mind, The Financial Inclusion Centre is providing seminars for consumer groups, civil society organisations, and other stakeholders including journalists looking for a deeper understanding of Brexit implications.

The seminars  cover the framework of EU legislation, the UK’s current approach to implementing EU legislation and, critically, what the implications of various Brexit scenarios might be for  UK financial consumers and financial market regulation.

The one day seminars are led by Mick McAteer, one of the UK’s best known consumer advocates with 20 years experience representing UK financial consumers at UK and EU level, and John Crosthwait, previously a senior lawyer with one the leading law firms in the City and a specialist in  financial services law and regulation.

Seminars can be organised for individual organisations or provided on a group basis.

The seminar programme can be found here: financial-inclusion-centre-brexit-seminars

For further information including on costs please contact

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Policy and Risk Outlook

The Financial Inclusion Centre today publishes its Policy and Risk Outlook which identifies nearly 30 major policy issues and risks which need to be addressed if financial markets are to work for society.

The resilience, efficiency and conduct of the UK financial services industry is critical to the economic well-being of UK households, the ‘real economy’, current and future generations.

Retail financial services has historically been the focus of consumer group and media scrutiny. A litany of financial misselling scandals (now costing £50bn according to the latest tally) has left a legacy of mistrust and low levels of confidence in the industry. On the face of it, there have been improvements in the conduct of firms in retail financial services. But serious concerns remain about the dominant culture. All this is bad enough in its own right but a wider cause for concern given how much consumers are expected to rely on retail financial services in the future.

Households are expected to use financial products and services to build financial resilience and long term financial security. But, much of the industry has not adapted to the new economic and financial reality forged by low returns, technological change, more realistic regulation, changing labour markets, and squeezed household finances. The industry is becoming less relevant for growing numbers of economically vulnerable households.

Financial services isn’t just a pure consumer issue. Financial services already play a significant role in meeting public policy needs such as housing, retirement incomes, long term care, and social security replacement. This role is expected to increase over the years as policymakers attempt to transfer risk and responsibility for meeting these needs to citizens. But, the financial services industry isn’t ‘fit-for-purpose’ to provide the products and services people need.

Sitting behind retail financial services are the huge wholesale and institutional financial markets and financial infrastructures. These markets and infrastructures are of national economic interest.

We have only begun to understand the conduct failures in these critically important markets. Our analysis suggests that inefficiencies and market failure in these sectors (such as resource misallocation and poor investment performance which undermines retirement incomes) have a greater impact on the economic welfare of households and the real economy than retail financial services. Despite their importance, wholesale and institutional financial markets receive comparatively little scrutiny from civil society.

Behaviour and activities in financial markets continue to create systemic risks and threaten economic resilience. Financial markets can exacerbate regional, intra and inter-generational economic inequality.

Market failure doesn’t just harm consumers, it can harm the interests of firms – for example, high charges on investment funds extract value from consumers’ savings and reduce the amount of investment capital that reaches firms. Market short-termism affects the ability of firms to invest for the long term.

That is the state of play now. Financial markets and services are not working well for society. There is much to be done to remedy existing failures. But, more challenges lie ahead. The environment in which financial services operates is being reshaped by a range of powerful external forces creating a range of risks and challenges for the industry and its customers.

It is important that consumer groups, civil society, policymakers, regulators and, of course, the industry itself understand the current and emerging risks and policy issues. To identify the major risks and policy issues we used a two stage process:

  • We analysed the forces shaping the environment for the financial services industry ie. socio-economic, demographic, technological, commercial, and political factors; and
  • Applied four tests to assess how well financial services will respond to these challenges and identify which sectors and activities create the greatest risks for consumers and the real economy.

From this process, nearly 30 risks and issues emerged. To provide some structure, we have grouped these into the following areas:

  • Retail financial services including financial inclusion.
  • Wholesale/ institutional markets, and financial infrastructures.
  • Major areas of public policy in which financial services has a role.
  • How regulatory and public policy is developed.

Much more work now needs to be done to develop the robust policies to address the risks and issues identified here. As a small, non-profit organisation we have limited resources so would welcome the opportunity to work with other civil society organisations, regulators and progressive firms in the industry to make markets work better.

The Policy and Risk Outlook can be found here: Financial Inclusion Centre policy and risk outlook 2016 final

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A new Renters and Leaseholders Protection Agency (RLPA)

Today (14th July 2016), The Financial Inclusion Centre publishes a pamphlet calling for the creation of a Renters and Leaseholders Protection Agency (RLPA) to protect renters and leaseholders from unfair, abusive practices and to help raise the quality of homes in the rented sector in the UK.

There is a compelling social justice and consumer protection argument for a new RLPA. The authorities recognise that, given the importance of financial services, the complexity of the products, and the lack of consumer sovereignty, a person transacting with the financial services industry deserves the protection of a well-resourced, effective financial regulatory and redress system. Yet, if the same person pays money to rent a property, s/ he is not afforded the same degree of consumer protection. Having a decent home is as important as financial services and detriment can have a huge impact on those affected. Consumer sovereignty is weak in this market.

Renters spend around £63bn a year on rent. It takes up a huge share of their incomes. There has been a major growth in the private rented sector. Overall, there is now a greater proportion of households renting (private and social) than owning a home with  a mortgage. There is a worrying level of detriment in the rented sector. The regulatory anomaly between the two sectors is unfair and surely unsustainable.  

But, the unfairness and inconsistency is worse if we consider the profile of renters. Consumers that use regulated financial products and services tend to be better off than average. Whereas renters tend to be on lower incomes, so the detriment caused can have a disproportionate effect. Similarly, renters tend to be younger and may not have had the opportunity to build up high levels of financial capability leaving them more vulnerable to unfair practices than experienced older consumers.  Therefore, if we apply the principles of consumer theory, consumer-renters should be a priority for consumer protection.

The current system for protecting renters is complex, fragmented and poorly resourced. With FIC proposals, renters would be given a new charter of consumer rights.  The new RLPA would have powers to set fit-and-proper tests and authorise landlords and agents, supervise and enforce renters’ rights, impose fines and sanctions on landlords and agents, recommend the setting of local rent caps, and direct local authorities to improve local markets.

The new pamphlet can be found here: FICrentersprotectionagencypamphletfinalcopy


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Encouraging savers, supporting the overindebted

Today, The Financial Inclusion Centre and partners published a new report, Britain’s debt, how much is too much?, commissioned by the ACCA.

The report examines household financial resilience, its links with household income, credit use and overindebtedness with a focus on three at risk groups – the self-employed, households on variable incomes, and students.

It also looks in more detail at the non-standard credit market assessing the impact of the much needed clampdown on payday lending and the higher risk end of the credit card market where serious problems are evident. Of active credit cards, the FCA estimates that 5.1 million accounts (nearly 9% of total) will take more than 10 years to pay off their balance (on current repayment patterns and assuming no further borrowing).  Nearly one in five credit cardholders are financially vulnerable in some way – either already struggling or at risk of problem debt. Higher risk borrowers have very limited choice and are paying much higher costs for their credit.

As well as identifying problems, the report makes a series of recommendations to support households who are overindebted and, crucially, to help households build financial resilience and long term financial security.

We set out a road map to long term financial security with measures designed to: help households deal with debts; improve access to fair and affordable credit; encourage more positive financial behaviours; and support the build up of savings. Supporting savings is critical as the UK household savings ratio has fallen dramatically over the past five years and is projected to remain low. Yet we know that when households have a savings cushion this can help them avoid getting into problem debt.

We argue for a combination of:

  • more robust, targeted regulation to deal with consumer detriment in the non-standard credit market;
  • greater use of ‘nudge’ techniques and fintech to encourage positive behaviours such as greater use of alerts to warn households of credit limits being breached, persuading people who have completed debt management plans to start saving, and extending auto-enrolment to include a savings element; and
  • financial innovation in the form of social lending bonds and ethical lending markets to enhance the capacity of the non-profit alternative lending sector to replace payday lenders and rent-to-own providers.

We are keen to promote social lending bonds as a way of encouraging much needed long term, patient capital into the alternative lending sector.

The full report can be found here: britains-debt final report

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Better and Brighter-Responsible Rent to Own Alternatives

Today, The Financial Inclusion Centre publishes a new report into the Rent to Own (RTO) sector. Over 400,000 households, almost exclusively on low incomes and reliant to some degree on benefits, take out expensive credit to spread the cost of purchasing consumer goods from furniture and large household items such as cookers and washing machines to electrical items such as TVs and computers.

The report describes the detriment faced by vulnerable consumers using the sector and makes a number of recommendations to encourage the development of a socially responsible alternative RTO sector.

The sector has proven to be recession proof, more than doubling in size over the last five years since the onset of the economic crisis and is dominated by just three providers – BrightHouse, by far the most well recognised and largest firm, PerfectHome, and non-store based provider Buy As You View. Over the last five years, annual gross profit within the sector has grown by 139% from £127 million to £303 million.

RTO providers can be found on the high streets of our more deprived communities. There are now 373 RTO stores, spread across the country – a figure that has grown by 140% from 155 stores in 2008. According to BrightHouse there is a potential market for 650 stores across the UK.

Consumer detriment

The typical RTO customer profile is a young female lone parent, living in rented accommodation and almost exclusively from low income households that are wholly or partly reliant on welfare benefits. There are a range of detrimental practices found within the RTO industry, including:

  • RTO agreements are expensive and price transparency is poor – with interest rates reaching 99.9% APR and charges for additional cover, the cost of goods can almost triple.
  • Customer experience high levels of financial difficulties – with roughly half having some degree of late payment and failing repay.
  • High numbers of customers have their goods taken back – with over 10% of customers having their goods repossessed.
  • Poor value and often unnecessary bolt-on service cover, warranties and insurances – with at least 85% of BrightHouse customers estimated to purchase such services.
  • The market structures make customers exposed to over-charging and poor practices – with few choices consumers are therefore more vulnerable to over-charging and unfair activities.
  • RTO is inappropriate for a proportion of customers – with firms found not to be considering user’s financial circumstances.

Such issues have placed the industry firmly under the spotlight of policy makers and the regulator, with the Financial Conduct Authority (FCA) set to outline new rules in 2016 giving greater protection for vulnerable consumers as well as creating a more level playing field for better value alternatives.

Responsible alternatives

In response, over the last few years a number of social businesses have responded by developing alternatives to compete with the RTO retailers. These combine some of the more ‘positive’ characteristics of the RTO model that appeal to consumers but delivered in a way that designs out some of the more harmful aspects. By doing so, these alternatives are able to generate significant cost savings for low income customers and thus help avoid paying a poverty premium for their essential goods.

The report contains a number of case studies of RTO alternatives run locally and nationally that offer differing delivery models.

Delivery model options:

The five case studies demonstrate just how different the delivery models can be and highlight the particular challenges which need to be addressed if the alternative sector is grow. The key issues are:

Credit provision – who will deliver the lending facility.

In-house loan delivery directly by the social RTO firm – This requires the creation of new lending vehicles with effort and time to obtain regulatory permissions and raising of capital finances.

Outsource credit delivery to an existing social lender – Partnering with an existing affordable credit provider (typically a credit union or CDFI) can benefit from its ability to raise capital, its existing lending track record/infrastructure and user’s access to other financial services. Yet, it can be more restrictive, being tied to certain lending criteria, approaches or risk appetites.

No matter who provides the borrowing, three important lessons have emerged:

  • The consumer’s selection of the goods and their credit application/decision needs to be seamless, even if it is actually operated by two different entities.
  • The loan process needs to be straightforward and decisioning making needs to be made almost immediately through the social lender’s own systems.
  • Some degree of automation and access to credit scoring/reference data is important and therefore the selected credit provider will require appropriately developed IT technology.

Lending capital – who provides the capital for lending and who shoulders the lending risk.

If the credit provision is undertaken in-house or via a franchise model, significant capital will need to be secured. Equally, an outsourced credit partner could still require external capital to be raised depending on their available funds and willingness to lend for this type of purpose/product.

Moreover, lending risk could be shared by establishing either ‘ring-fenced’ lending capital or an underwriting agreement to cover potential defaults. This gives greater flexibility to lend to ‘those in the grey area’ who might ordinarily be too risky for the social lender’s traditional credit assessment.

Delivery outlet – how will household goods and lending be promoted and accessed by customers.

Retail shop – for some, creating a high street retail outlet that mimics the look of BrightHouse is seen as essential. The main consideration is the huge start-up and ongoing operational costs and whether it can be financially viable from the income generated primarily from product mark-up.

Online provision – websites enabling product selection and ordering combined with loan application and assessment should be an essential aspect of any RTO alternative. Whether this is the sole route to market or one of many channels is the key consideration with the choice set in the context of the target customer and their ability to access a purely online facility.

Catalogue delivery – a complementary brochure is also very important, particularly with a restricted access model focused on social housing residents. Consideration also needs to be given to a telephone-based facility that enables customers to both apply for credit and place orders.

Product operations – who manages the stock, order delivery and customer relationship.

Developing in-house product operations – this option is particularly challenging as it needs extensive scale and volumes to make it financially viable and significant upfront / ongoing costs.

Outsourcing by partnering with an existing RTO provider – the far easier option would be to piggy backing on an existing RTO alternative and utilising their supply chains – either by working with a formal franchise (e.g. Smarterbuys or Coop Electical) or a particular scheme (e.g. Fair For You). However, this may limit the scope for product tailoring and reduce income generation.

Creating direct arrangements with individual suppliers – either local/regional businesses (e.g. Furniture 4U) or national firms/manufactures (e.g. Fair For You). This enables the selection of certain product lines based on quality and income generation potential and could also be attractive from a local economic development and employment perspective.

Customer base – should it provide open access to all or be restricted to certain users.

Open access – with the need for scale and volume an open access model would appear to provide the greatest scope for financial sustainability.

Restricted access – this model is often found amongst social housing providers delivering a RTO alternative specifically for their residents and is confined primarily from a wish to focus resources only at their own users. Alternatively, this could still be achieved through an open access model but with the ring-fencing of funds for specific groups of users.


By exploring the current crop of social providers offering RTO alternatives, it is clear that there is no single approach that offers the perfect delivery solution. Instead, there are a number of delivery considerations that can developed to best match the specific local circumstances and aspirations. One common feature of all the featured case studies is the need to involve a range of stakeholders. Partnerships are needed to bring together local authorities, social housing providers and other third-sector organisations looking to address this issue.

Ultimately, it is hoped that the research stimulates debate, providing further focus on the rationale for intervention in this market and providing a starting point for anyone considering the various options for which type of RTO alternative offers the most appropriate solution.

Summary Report can be accessed here – Better and Brighter – Responsible RTO Alternatives (Summary 150316)

Full Report can be accessed here – Better and Brighter – Responsible RTO Alternatives (Full Report 150316)

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What has the EU ever done for us? The EU referendum and consumers

UK citizens have gained much from a huge range of consumer and social protection measures introduced through, or influenced by, EU legislation and regulations[1]. Consumer protection measures can be found across a wide range of markets including financial services, food, health and medicines, utilities, electronic goods, transport and tourism, and so on. The measures were introduced to make products and markets safer, give us access to a wider choice of better value products and services, and enforceable rights and redress if things go wrong. But, it’s more than that. These measures have given us a better quality of life. However, there is a very real risk that UK citizens could lose valuable protection as a result of the EU referendum – regardless of whether the UK votes to remain or leave.

Of course, we would still have consumer protection if the UK leaves the EU. But, experience tells us that the degree of protection available to UK consumers is higher in key areas because of UK membership. Put bluntly, the EU has had a ‘civilizing’ effect on the UK. Other major EU member states attach more importance to social justice, the rights of citizens and the belief that markets should serve society – in contrast to the dominant ideology in the UK which puts the market first. Therefore, if the UK votes to leave, we think there is a very high risk that consumer rights and power would be weakened.

But, why might consumers lose regardless of which way the vote goes? One of the key planks of the UK Government’s negotiations relates to ‘competitiveness’. That is, the UK Government says it is trying to get the other EU governments and EU institutions to agree to a programme of deregulation to aid competitiveness and the development of the single market.

We note with growing concern the regular scaremongering about regulatory ‘burdens’ and ‘red tape’ stifling innovation and competitiveness. In our experience, this is code for deregulation and reduction of important consumer protection and other social protection measures. This, of course, would benefit big business and the UK financial sector in the short term. But, it is a misguided approach and could increase the risk of consumers being ripped off and being exposed to risky products and services. Ultimately, this would harm consumer confidence and trust in the single market and actually hurt the long term interests of industry. Regulation levels the playing field for consumers, promotes consumer confidence and creates the conditions for true innovation and effective competition.

There are examples of duplication and inconsistency in EU legislation and regulation which could be streamlined. But, claims that regulation stifles innovation and competition is just scaremongering and is just plain wrong. This is all part of a campaign by industry lobbies to reduce corporate costs and liability and transfer risk and responsibility to consumers and wider society.

The media has been distracted by the sensitive issue of welfare benefits (which in all likelihood will have very small monetary impact on UK households) and the political drama of the referendum itself. But the issue that could have a very real effect on our citizens’ rights and quality of lives has not been subject to any meaningful scrutiny. Real progress has been made in many of the major consumer markets as a result of EU legislation and regulations. But there is still much to be done particularly in areas such as financial services. Now is not the time to reverse the progress made. We need to have a proper, transparent debate about this rather than sleepwalking into losing valuable consumer protection and rights.

More detail can be found in the Blog. See:

[1] There is also a huge body of employment rights at jeopardy. These are not within our remit but it should be pointed out that if these are weakened, financial and social exclusion could be exacerbated.

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The ‘Financial Advice Gap’ – it’s the economics, stupid

HM Treasury and the Financial Conduct Authority (FCA) have recently launched the Financial Advice Market Review (FAMR)[1] to address the so-called ‘financial advice gap’ in the UK – concerns that large numbers of consumers do not have access to good quality financial advice.

Good advice is critical for promoting financial inclusion, financial resilience and security amongst households – particularly lower-medium income households which are the focus of our work at the Financial Inclusion Centre. So, we welcome the FAMR. But, it is important that we understand the real causes of the advice gap. In our new paper, we explain how claims that the advice gap is caused by or has emerged because of over-regulation are wrong – or disingenuous and used to try to reduce much needed consumer protection. Remedies based on false analysis would exacerbate rather than improve the situation.

A more accurate assessment is that robust, better regulation has exposed a long established advice gap. Of course, many lower-medium income consumers were ‘advised’ on and sold insurance, investment and personal pension products in the past. But, as we now know from the litany of misselling scandals, these products were all too often unsuitable and represented poor value for consumers due to high charges and commission payments to advisers/ intermediaries. In effect, consumers were cross-subsidising the sale and distribution of these poor value products.

It would be easy to close the advice gap if we just allowed the industry to go back to advising on and selling poor value, unsuitable products. But, of course, that would be unacceptable.

The real reasons for the advice gap in our view are: growing numbers of consumers simply cannot afford to save and invest, or pay for for-profit advice; and large numbers of consumers are ‘underserved’ by the financial services industry because the industry is still too inefficient to meet their needs. In other words, the advice gap can be explained by the economics of access and distribution, not over-regulation.

Reducing consumer protection to encourage the industry to serve more consumers is not the way forward. Instead the industry would more likely continue to serve medium-higher income consumers but with weaker constraints on its behaviours. The overall effect would be to just transfer the risk of misselling to consumers thereby undermining confidence and trust in financial services. Closing the advice gap means focusing on making the financial services industry more efficient so it can extend its reach to more consumers and providing alternative provision for consumers who are not commercially viable for the for-profit advice sector.

The new paper can be found here: financial inclusion centre FAMR blog final


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London Social Housing Bond

We recognise at the Financial Inclusion Centre that London isn’t the only region in the UK facing a housing crisis. But, for a number of reasons, the crisis does seem particularly acute in London and requires special interventions. We take the view that four policy interventions are needed to tackle the housing crisis in London:

  • Efficient funding mechanisms to fund the necessary increase in supply of housing in London;
  • Targeted rent controls to protect renters, reduce the amount spent by taxpayers on housing benefit, and to address the high rent/ buy-to-let/ high house price spiral (this could also be addressed through prudential regulation of buy-to-let mortgages);
  • A decent consumer protection regime for renters with similar rights and protection available to financial consumers; and
  • Reforms to property and land taxes, and the planning system.

In this discussion paper, we summarise some of the key problems facing people wanting to get access to a decent home and focus on the need for efficient funding mechanisms to fund new supply of social housing.

Specifically, we are floating the idea of developing a London Social Housing Bond to raise funds from large institutional investors through the bond markets and ordinary Londoners to build new social housing. Papers on the other interventions will follow.

These are very much preliminary ideas. A great deal more work needs to be done to develop the legal structure of the LHA Social Housing Bond, how the bond would be marketed and distributed, pricing and, most importantly, estimating more accurately how much could be raised from institutional investors and ordinary households.  But, we think it is critical to start a debate on how to fund the necessary housing in the most cost effective way.

We are concerned that, for whatever reason, more expensive options such as using pension funds and insurers are being heavily promoted. This will be to the detriment of ordinary households (who could foot the higher costs) and/or renters who could end up paying higher rents than is necessary. It would also simply result in huge fees being generated for City advisers – money which should be going to fund affordable housing.

We would very much welcome collaborating with interested parties on developing the bond and investigating other ways of addressing the housing crisis in London.

The discussion paper can be found here:

Financial Inclusion Centre-London Social Housing Bond

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