Today, the Financial Inclusion Centre publishes a briefing paper discussing the issue of financial vulnerability and rights. The paper can be found here: http://inclusioncentre.co.uk/wordpress29/wp-content/uploads/2020/08/FINANCIAL-INCLUSION-CENTRE-FINANCIAL-VULNERABILITY-BRIEFING-PAPER-FINAL.pdf
The Financial Conduct Authority (FCA) has focused its attention recently on the issue of financial vulnerability and ensuring that financial providers treat vulnerable consumers fairly. With this in mind, this briefing paper discusses:
- What is financial vulnerability, and what causes it; and
- What firms, regulators, and policymakers can do to tackle individual vulnerability, structural and systemic harm, and enhance consumers’ rights.
The FCA’s work is very important. If it is implemented and enforced properly, it could make a real difference to large numbers of vulnerable individuals. But, the FCA’s work focuses primarily on the personal circumstances of consumers and an individual’s relationship with an individual firm. This is not a criticism of the FCA. The regulator has to supervise and enforce against individual firms.
The FCA can, of course, launch market studies to investigate practices and features of markets that cause widespread detriment. However, interventions resulting from these market studies are about making the market work better, and do not confer rights on vulnerable consumers.
The FCA talks about fair treatment and fair risk pricing meaning consumers are not unduly excluded. It also talks about how in a market-based economy, consumers do not have an automatic right to receive products and services. There are some specific universal obligations in consumer markets – for example, with regards to postal services, and some telecoms services. In financial services, certain institutions must offer payment accounts with basic features. But, firms in the UK generally do not have an obligation to provide products and services.
Consumer vulnerability is inherent in market based provision of services. The FCA does not tackle systemic vulnerabilities and discrimination. For example, entire groups consumers can find themselves paying more for, or excluded from, essential financial services just because they are poor or because the market considers them to be a high risk. These are matters for government rather than regulatory policy.
So, in any discussion of financial vulnerability and rights, we should not lose sight of the limits of the FCA’s remit. Alternative interventions will be needed to address systemic discrimination and exclusion particularly in the aftermath of the Covid-19 pandemic. We need an approach which treats the provision of essential services as a right, not as a consumer good provided at the discretion of the market.
We hope that civil society and consumer organisations recognise the limitations of the FCA’s approach (important as it is), and have the courage to push for alternative, bolder solutions.
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