Treasury Committee
Wednesday 24th June 2026
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14:21
Speaker 1
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Speaker 1
Order, order!Welcome to the Treasury Select Committee on Wednesday, the 24th of June 2026. We're here today to talk about consumer finance, an area of interest to the committee. And I know to a lot of people in the. Country. Um, and I'm delighted to welcome four experts on consumer finance. And I should say that the feedback and input we get from these witnesses helps us question the government on its policies, on a number of areas relating to consumers.
I'm delighted to welcome with us in the room today, James Daly, who's the managing director of Fairer Finance, and Rocio Concha, who's the director of policy and advocacy and the chief economist at which the consumer organisation and online we're joined by Janine Rennie, who's the chief executive of Money Advice Scotland, and Anne Pardoe, who's the head of policy at Citizens Advice. So a very warm word. Welcome to you all today. Um, before we go into some of the other areas that we hope to discuss, it's quite timely that you're in front of us today because we received a letter from the Chancellor yesterday about the proposed changes to Isa's, uh, following on from last autumn's budget, when the government announced it was changing the cash Isa allowance from 20,000 to 12,000 and allowing £8,000.
So keeping the 20,000 envelope, but 8000 of which would have to be, if you reach the top of that envelope in an investment. The Chancellor's and allowing £8,000. When the government announced it was changing the cash Isa allowance from 20,000 to 12,000, top of that envelope in an investment Isa, and there's been a lot of discussion about how that would work. The Chancellor has set out in a letter to us the detail of how that would work. Um, and I just really wanted to know, um, you know, if you, what you thought about this issue about cash, like investments budget, when the government announced it was changing the cash Isa allowance from 20,000 to 12,000 and allowing £8,000.
So keeping the 20,000 envelope, but 8000 of which would have to be, if you reach the top of that envelope in an investment. Isa and there's been a lot of discussion about how that would work. The Chancellor has set out in a letter to us the detail of how that would work. Um, and I just really wanted to know, um, you know, if you, what you thought about this issue about cash, like investments in stocks and shares and this proposal to introduce a charge on interest paid in them and whether really what conversations you may have had with the Treasury on this.
So can I start with you, Janine Rennie.
I'm delighted to welcome with us in the room today, James Daly, who's the managing director of Fairer Finance, and Rocio Concha, who's the director of policy and advocacy and the chief economist at which the consumer organisation and online we're joined by Janine Rennie, who's the chief executive of Money Advice Scotland, and Anne Pardoe, who's the head of policy at Citizens Advice. So a very warm word. Welcome to you all today. Um, before we go into some of the other areas that we hope to discuss, it's quite timely that you're in front of us today because we received a letter from the Chancellor yesterday about the proposed changes to Isa's, uh, following on from last autumn's budget, when the government announced it was changing the cash Isa allowance from 20,000 to 12,000 and allowing £8,000.
So keeping the 20,000 envelope, but 8000 of which would have to be, if you reach the top of that envelope in an investment. The Chancellor's and allowing £8,000. When the government announced it was changing the cash Isa allowance from 20,000 to 12,000, top of that envelope in an investment Isa, and there's been a lot of discussion about how that would work. The Chancellor has set out in a letter to us the detail of how that would work. Um, and I just really wanted to know, um, you know, if you, what you thought about this issue about cash, like investments budget, when the government announced it was changing the cash Isa allowance from 20,000 to 12,000 and allowing £8,000.
So keeping the 20,000 envelope, but 8000 of which would have to be, if you reach the top of that envelope in an investment. Isa and there's been a lot of discussion about how that would work. The Chancellor has set out in a letter to us the detail of how that would work. Um, and I just really wanted to know, um, you know, if you, what you thought about this issue about cash, like investments in stocks and shares and this proposal to introduce a charge on interest paid in them and whether really what conversations you may have had with the Treasury on this.
So can I start with you, Janine Rennie.
14:23
Speaker 2
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Speaker 2
Yes. Thank you. So obviously, as part of financial inclusion, savings are really important to consumers. Um, and having appropriate savings levels there for people. And one of the important things for the people that we support is that they have access to their savings at short notice if need be. Um, so that's why cash ISAs can be really attractive for consumers, obviously, um, I can understand the proposal of saying that we want to have stocks and shares ISAs because their potential there's more risk, but there's potentially more return as well.
Um, and obviously it's going to be, there'll be more incentive for people to go into stocks and shares Isa because um, they will be able to put more into that, uh, in the future. So, but then I think one of the issues that's been there is that there'll be left in a stocks and shares Isa as if they're a cash Isa and that um, then that will be the issue where they will potentially be subject to tax on interest. A lot of self-employed people use ISAs, um and stocks and shares ISAs to plan for their retirement.
Um so potentially this will lead to them not doing that. But so I can see that the benefits in terms of ensuring that people gain the maximum amount from their savings. And obviously that's something that we would want, but also have concerns that people do need. Financial circumstances change all the time. We see that constantly, and people do need quick access to their money, and that includes people who are self-employed, businesses where they need fast access to their money quite often.
Um, and obviously it's going to be, there'll be more incentive for people to go into stocks and shares Isa because um, they will be able to put more into that, uh, in the future. So, but then I think one of the issues that's been there is that there'll be left in a stocks and shares Isa as if they're a cash Isa and that um, then that will be the issue where they will potentially be subject to tax on interest. A lot of self-employed people use ISAs, um and stocks and shares ISAs to plan for their retirement.
Um so potentially this will lead to them not doing that. But so I can see that the benefits in terms of ensuring that people gain the maximum amount from their savings. And obviously that's something that we would want, but also have concerns that people do need. Financial circumstances change all the time. We see that constantly, and people do need quick access to their money, and that includes people who are self-employed, businesses where they need fast access to their money quite often.
14:24
Speaker 1
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Speaker 1
Okay. I mean, the Chancellor said that this doesn't stop people, um, not it doesn't prevent, and I quote, normal investor practices such as holding cash to pay account fees or cash awaiting investment as the rules will continue, allow cash to be held in a non cash Isa. Does that give you any reassurance?And from at all.
14:25
Speaker 2
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Speaker 2
Yeah. It's reassuring that the cash is still there without taxation. Um I think the changes are that in 2027 there'll be less able to be invested into a cash Isa and more in stocks and shares. Isa so I think it's gone down to about 12,000. And um that we can be into a cash Isa. So potentially there's not as much incentive there for people to be able to invest as there was. So I think that that's kind of the main concern that, um, there's more incentives to go into the stocks and shares Isa, where there's increased risk.
14:26
14:26
14:26
14:27
Speaker 3
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Speaker 3
I don't have those figures to hand, but, um, I mean, if I might, the one point, a couple of points I wanted to make about these changes. I mean, firstly, they introduce new complexity into the system, which I think is always a bad thing. Um, and you know, now you can only have cash like investments, um, up to, uh, you know, either all or not, I think 95% is the limit that you're going to be taxed on interest. Um, and you know, all of this just creates an extra burden on consumers who already really struggle, uh, to, to understand financial products and, and the system.
And so, um, you know, any additional friction, I don't think is a good thing. The other thing that's really important to say, um, is that most investment platforms don't pay any reasonable amount of interest on the cash held in accounts. And of course, um, it's all the more important if you can't transfer your cash from a stocks and shares Isa to in a cash Isa that you're getting a reasonable return on the cash that's in there because it's, it's a normal behaviour to take some of your money out of the market at certain times.
You might decide that this is a volatile moment. You want to have a higher holding in cash. You know, you then can't take that out. So most investment platforms are not paying much interest. Some are paying no interest at all. And I think if the Treasury is going to add this taxation charge here and create these restrictions, it's really important, um, that investment platforms are leant on to pay reasonable interest rates there. And this was something that the FCA was looking at in December 2023, but it just dropped it.
And so, um, you know, any additional friction, I don't think is a good thing. The other thing that's really important to say, um, is that most investment platforms don't pay any reasonable amount of interest on the cash held in accounts. And of course, um, it's all the more important if you can't transfer your cash from a stocks and shares Isa to in a cash Isa that you're getting a reasonable return on the cash that's in there because it's, it's a normal behaviour to take some of your money out of the market at certain times.
You might decide that this is a volatile moment. You want to have a higher holding in cash. You know, you then can't take that out. So most investment platforms are not paying much interest. Some are paying no interest at all. And I think if the Treasury is going to add this taxation charge here and create these restrictions, it's really important, um, that investment platforms are leant on to pay reasonable interest rates there. And this was something that the FCA was looking at in December 2023, but it just dropped it.
14:28
Speaker 1
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Speaker 1
Okay, well we've got the FCA coming in front of us in the next few weeks, so thank you for that. I mean, lots more we could go into here, but we've only recently just had the letter like I think some of you yesterday. So we'll digest it. And we hopefully putting some of these points to the minister too. But there's also an issue, interesting issues around the lifetime Isa, which we've looked at on this committee. Mr. Dean, do you want to.
14:28
Speaker 4
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Speaker 4
Thank you, chair, and if I may, could I just, um, push you on a couple of points that you raised there?First of all, about the complexity for the consumer, presumably if you're getting a stocks and shares Isa that you're handing over degree of control to whoever manages that fund anyway. So is that complexity really for the consumer or is that for the fund manager?And the second point about not being able to take it out, of course, consumers can take it out in cash, but just not get the same benefit tax benefit.
Because obviously the idea of this is creating incentives to save in different ways. And the government wants to now create greater incentives towards saving via stocks and shares than they did do in the past. So I just wanted to give you an opportunity to come back on those two points. Yeah, sure.
Because obviously the idea of this is creating incentives to save in different ways. And the government wants to now create greater incentives towards saving via stocks and shares than they did do in the past. So I just wanted to give you an opportunity to come back on those two points. Yeah, sure.
14:29
Speaker 3
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Speaker 3
So firstly, I'm in a stocks and shares. Isa is just a wrapper. What you put in that is up to you. Some people may hand it all over to a fund manager who will change the asset allocation. Other people will decide to put some in this fund, some in that fund, some in some stocks and shares directly and keep some of it in cash. Uh, now, you know, you're right that, um, it's up to the Treasury to decide how they want to tax interest on cash.
The difficulty is if you remove money from a stocks and shares Isa, you have lost that tax shelter forever. Um, so, you know, as things stand now you can move your money from stocks and shares Isa into a cash Isa and you retain that allowance. You get your allowance every year. But if you withdraw money, you can't replace that. Okay. And so that's the issue.
The difficulty is if you remove money from a stocks and shares Isa, you have lost that tax shelter forever. Um, so, you know, as things stand now you can move your money from stocks and shares Isa into a cash Isa and you retain that allowance. You get your allowance every year. But if you withdraw money, you can't replace that. Okay. And so that's the issue.
14:30
Speaker 4
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Speaker 4
Okay. I'll move on to the first time buyer Isa now as well. That's newly created. Consultation proposal. But to, to essentially replace the lifetime Isa. And the main change seems to be the decoupling from a pension saving product. Um, we don't yet have full details about it. We don't know about the property cap. We don't know about how much bonus will be paid. But what do you make of the proposed changes so far?
14:31
14:32
14:32
Speaker 1
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Speaker 1
Yes, yes. It's just very, very recently announced. So, uh, thank you for that. Now, I just wanted to then move on to the financial Services and Markets Bill, which is in front of the House of Lords, um at the moment. Um, really to gain quickly from you a quick round robin. What, which bits of the bill worry you. Let's start with Ampadu.
14:32
14:33
14:33
Speaker 6
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Speaker 6
Thanks very much. Um and thanks for having me along. So I think like just to give a couple of overall reflections on the bill, we do support government's ambition at Citizens Advice to strengthen UK's financial services sector and also kind of ensure that regulation is supporting growth. But we also don't think that consumer protection and growth are competing objectives. And we believe that the Financial Services Bill, in its current form, risks shifting that balance between industry and consumers too far in favour of industry.
There's very little that's in there for consumers in terms of improving their protections and experience. And we believe that overall, the package reduces protection and access to redress for consumers. I think this is really important for two reasons. One is that we know that trust in financial services markets is already low, alongside other essential services markets. Our new research shows that public SI is a really clear imbalance of power. Uh, when ordinary consumers have to challenge large companies.
Um, and also the Financial Services Compensation Scheme found that only a quarter of consumers trust financial services firms to act in their best interest. And the second is that we do see a significant amount of harm within the markets, as CMA's research found that consumers suffered £6.5 billion of financial harm in financial services markets in the year up to April 2024. And I think like the other thing that I'd sort of say about the financial services market is that unlike in other essential markets, people don't have the same level of access to free, trusted, impartial advice and also don't have a statutory consumer champion in their corner.
And I think that that kind of means that, um, when. It comes to big moments like this financial services bill, the voice of industry massively outweighs the voice of consumers in terms of the areas I kind of pick out in the bill, I think the things we're most concerned about are around changes to the financial Ombudsman scheme. Um, and we also have some questions about the impact of the Consumer Credit Act reforms as well. But perhaps we'll kind of get into those in a bit more detail.
There's very little that's in there for consumers in terms of improving their protections and experience. And we believe that overall, the package reduces protection and access to redress for consumers. I think this is really important for two reasons. One is that we know that trust in financial services markets is already low, alongside other essential services markets. Our new research shows that public SI is a really clear imbalance of power. Uh, when ordinary consumers have to challenge large companies.
Um, and also the Financial Services Compensation Scheme found that only a quarter of consumers trust financial services firms to act in their best interest. And the second is that we do see a significant amount of harm within the markets, as CMA's research found that consumers suffered £6.5 billion of financial harm in financial services markets in the year up to April 2024. And I think like the other thing that I'd sort of say about the financial services market is that unlike in other essential markets, people don't have the same level of access to free, trusted, impartial advice and also don't have a statutory consumer champion in their corner.
And I think that that kind of means that, um, when. It comes to big moments like this financial services bill, the voice of industry massively outweighs the voice of consumers in terms of the areas I kind of pick out in the bill, I think the things we're most concerned about are around changes to the financial Ombudsman scheme. Um, and we also have some questions about the impact of the Consumer Credit Act reforms as well. But perhaps we'll kind of get into those in a bit more detail.
14:35
14:35
Speaker 5
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Speaker 5
Um, I fully agree with Anne about the overarching, uh, Bill, the this is a bill for financial services to benefit financial services sector. There is very little here for consumers. And some of the changes that the bill introduce are quite fundamental for consumers. And our concerns are also on the Financial Ombudsman Service and the Consumer Credit Act. These two changes that are. There are. Worrying us a lot and it will be welcomed. The opportunity to discuss them in more detail.
14:36
14:36
Speaker 3
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Speaker 3
Yeah. I mean, for me, this is the culmination of, you know, a sort of change in direction in the Treasury since around November 2024, um, where the Chancellor started to make the case that, you know, the main thing standing in the way of growth is overregulation. Now, you know, I might agree with her in sectors outside of financial services. You know, I fundamentally don't agree with her in financial services. Um, and what we've ended up with is a sort of laundry list of the financial lobbies.
Wishes in the Financial services and markets bill. You know, we started off with the Chancellor, um, you know, saying that the Ombudsman Service was writing regulation through the back door. I mean, honestly, that is a 20 year old line that has been pushed out by the finance lobby. Um. Uh, and then a whole series of sort of measures to direct the Financial Conduct Authority, um, to focus its efforts on promoting what is meant to be its secondary objective to support growth, uh, and effectively making it primary.
And that has had an enormous impact in terms of redirecting their emphasis and sucking the life out of some of the really good consumer policies, such as consumer duty. Um, that was implemented. Um, so, you know, we'll get into the detail of the ombudsman reforms and the Consumer Credit Act. Some of it is fine in my view. Um, you know, a lot of it is really a waste of parliamentary time. And I think there were many more pressing things that could have been done.
Uh, and certainly in the case of the ombudsman reforms, we just don't think it was necessary.
Wishes in the Financial services and markets bill. You know, we started off with the Chancellor, um, you know, saying that the Ombudsman Service was writing regulation through the back door. I mean, honestly, that is a 20 year old line that has been pushed out by the finance lobby. Um. Uh, and then a whole series of sort of measures to direct the Financial Conduct Authority, um, to focus its efforts on promoting what is meant to be its secondary objective to support growth, uh, and effectively making it primary.
And that has had an enormous impact in terms of redirecting their emphasis and sucking the life out of some of the really good consumer policies, such as consumer duty. Um, that was implemented. Um, so, you know, we'll get into the detail of the ombudsman reforms and the Consumer Credit Act. Some of it is fine in my view. Um, you know, a lot of it is really a waste of parliamentary time. And I think there were many more pressing things that could have been done.
Uh, and certainly in the case of the ombudsman reforms, we just don't think it was necessary.
14:38
14:38
Speaker 2
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Speaker 2
Yeah. Thanks very much. Um, so from money Advice Scotland's point of view, the areas of greatest interest are the reform of the Consumer Credit Act. Obviously, the changes to the Financial Ombudsman Service and access to affordable credit, ensuring that customers continue to receive effective support and redress as financial services are becoming increasingly digital. And the key test for all the reforms that are being put forward is whether they improve outcomes for consumers in practice. Now, one of the things about the consumer duty is that we're supposed to see improved outcomes, but the consumer duty in itself is a very new, um, issue.
So it's we've only consumer duty is only fully been implemented since 2024. So we've yet to see if outcomes have been achieved by consumer duty. So and I'll come on to this later with the changes to the Ombudsman service. But the the independence of the Financial Ombudsman service to us is, is absolutely vital, um, to ensure while we're still in a very, very much. A changing situation with the different ways that customers have been consumers have been supported. So I think, um, there's a lot to be considered.
Um, and there's a lot in there for money advice Scotland in terms of how consumers who are vulnerable are being supported. That's a huge issue for us. And I suppose that's probably my main theme of today is how do we support vulnerable people?
So it's we've only consumer duty is only fully been implemented since 2024. So we've yet to see if outcomes have been achieved by consumer duty. So and I'll come on to this later with the changes to the Ombudsman service. But the the independence of the Financial Ombudsman service to us is, is absolutely vital, um, to ensure while we're still in a very, very much. A changing situation with the different ways that customers have been consumers have been supported. So I think, um, there's a lot to be considered.
Um, and there's a lot in there for money advice Scotland in terms of how consumers who are vulnerable are being supported. That's a huge issue for us. And I suppose that's probably my main theme of today is how do we support vulnerable people?
14:39
Speaker 1
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Speaker 1
Okay, well, I think you'll find some voices on the committee in a similar place on that. But just on before we move on to the detail of the Financial Ombudsman Service reforms, what would you like to see added to the bill, or would you would you like to see added?I mean, there's still the chance it's still going through the house. Um we'll go. James Daly first.
14:40
Speaker 3
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Speaker 3
Well, I mean, we've been very fixated on the general insurance markets. Um, and we think that there was an opportunity to get stuck into issues such as motor insurance affordability. And, you know, looking at whether or not some of the regulation that exists around insurance on the statute is fit for purpose. Um, so I think there were missed opportunities there, particularly in terms of, um, pricing. And, you know, I think consumer credit act reform needed to happen. But, you know, I don't think, um, you know, that was happening anyway, right?That just got rolled in with the financial services bill.
Um, at the last minute, I think a lot of the other things that we think need to happen are within the gift of the FCA to do. Um, but, but, you know, so really it's more what I'd like not to have happened. Okay.
Um, at the last minute, I think a lot of the other things that we think need to happen are within the gift of the FCA to do. Um, but, but, you know, so really it's more what I'd like not to have happened. Okay.
14:41
14:41
14:41
Speaker 5
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Speaker 5
Similar issues on the insurance market. I think that there is a lot to clarify. And actually in our super complaint, we put two cases of the legislation have to be more clear. And what is expected from the consumers when they have to claim on a particular what a particular case. And also there was an opportunity also here to give direct powers on enforcing consumer protection to the FCA. The FCA also have a role in enforcing consumer protection. They don't have that direct power.
They have to go to the courts. The question is why the bill doesn't do that.
They have to go to the courts. The question is why the bill doesn't do that.
14:42
14:42
Speaker 6
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Speaker 6
Yes, very much. I think I sort of touched on this in my opening, but I feel like, um, consumer representation and advice within the financial services sector is really lacking at the moment. Obviously, we've got, you know, the experts around the table today, but I think everyone will agree that it can be difficult to be across all of the many developments within the financial services sector and provide a really strong voice for consumers and also within these complex markets. And with some of the changes coming down, it's going to become more difficult for people to navigate.
People really need access to independent, trusted advice to kind of find their way through their problem and access redress where that's needed as well.
People really need access to independent, trusted advice to kind of find their way through their problem and access redress where that's needed as well.
14:43
14:43
Speaker 2
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Speaker 2
With what I've said there about the need for trusted advice there, it's, um, you know, our service said clearly our consumers don't understand what consumer duty is. They have no idea. Um so they don't know how to exercise their rights. Um, so they need somebody to support them within that. And while everybody previously knew who the Financial Ombudsman service were, and they trusted it in terms of being able to provide them that free advice, um, they're now in a situation where they're kind of in a bit of a place where they don't know what all the different processes are and how their rights will be met.
So there needs to be a measure in there, I think, to say, how will people be supported to understand all these changes?Um, but also I think there needs to be a, a strong link to financial inclusion strategy because that's a really key strategy as well. And I know this committee has considered that, and I think the links to that would have been really important within this bill.
So there needs to be a measure in there, I think, to say, how will people be supported to understand all these changes?Um, but also I think there needs to be a, a strong link to financial inclusion strategy because that's a really key strategy as well. And I know this committee has considered that, and I think the links to that would have been really important within this bill.
14:44
Speaker 1
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Speaker 1
Now, some people might say in the sector that consumer duty means that that they're doing their job to protect consumers, and they don't need all of these things. Can you perhaps quickly, each of you say why you think that's because clearly you don't think that's the case. Why do you think that is?What would your answer be to someone who says that?And Pardo.
14:44
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14:45
Speaker 6
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Speaker 6
The citizens advice we're strong supporter of the consumer duty. Um and if it's kind of rolled out correctly, should lead to better outcomes for consumers and make it easier for the regulator to clamp down on that. I think what I'd say is it's, um. Players aren't always super quick to act. And the FCA is an example of that. Um, and also even within that, people are still going to be having problems. They're still going to struggle to resolve them before the consumer duty kicks in.
And maybe I'm sort of being unfair, but I don't, I, we have seen some shifts in the way that industry is approaching kind of things in the context of the consumer duty. But we know that firms don't always act in the best interests of people. So we need strong advice for people in terms of helping them to navigate and solve their own individual problems. Then you also get the intelligence and data from those interactions, which often appear for us earlier than they do for regulator and in their firm's own data, shining a spotlight on those.
And then also, frankly, like holding regulators and the government to account when problems are arising and they're not being fixed, I think by now pay later, which I think we might talk about a little bit later, is an excellent example, where consumer groups were shouting, were shouting about it and shining a spotlight on it for a very long time. And then government decided to act. But then it still took a couple of years. And those regulations are coming in now, which is great. But in that time, we've seen a massive rise.
So consumer duty is great, but it doesn't kind of solve the need for strong advice and representation for consumers.
And maybe I'm sort of being unfair, but I don't, I, we have seen some shifts in the way that industry is approaching kind of things in the context of the consumer duty. But we know that firms don't always act in the best interests of people. So we need strong advice for people in terms of helping them to navigate and solve their own individual problems. Then you also get the intelligence and data from those interactions, which often appear for us earlier than they do for regulator and in their firm's own data, shining a spotlight on those.
And then also, frankly, like holding regulators and the government to account when problems are arising and they're not being fixed, I think by now pay later, which I think we might talk about a little bit later, is an excellent example, where consumer groups were shouting, were shouting about it and shining a spotlight on it for a very long time. And then government decided to act. But then it still took a couple of years. And those regulations are coming in now, which is great. But in that time, we've seen a massive rise.
So consumer duty is great, but it doesn't kind of solve the need for strong advice and representation for consumers.
14:46
14:46
Speaker 5
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Speaker 5
The point we are also very supportive of the consumer duty and what it tries to achieve. But our regulation doesn't achieve anything if there is no credible threat that is going to be enforced. So we are not seeing the FCA doing a lot of enforcement on the on the duty. And if you don't do that, the companies will not follow, you know, will not comply with this. And the other thing that I will say, regulators are here to look at systemic issues.
They look at systemic big problems. You still will need an independent organisation with, in this case, in this sector is the Financial Ombudsman Service to look at the individual cases. So the role of the Fox is also quite important on that. So having just the duty out there doesn't really resolve anything.
They look at systemic big problems. You still will need an independent organisation with, in this case, in this sector is the Financial Ombudsman Service to look at the individual cases. So the role of the Fox is also quite important on that. So having just the duty out there doesn't really resolve anything.
14:47
14:47
Speaker 3
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Speaker 3
Um, yeah. I mean, you know, from my perspective, the consumer duty sets a bar that is here. Most of the financial services industry is operating here. And the idea was that the FCA would slowly raise the bar by doing sector by sector thematic reviews or cross-cutting reviews that looked at some of the themes of the duty. And they started off very firmly there. You know, you'll remember the the way they dealt with problems in the gap insurance market, which was a niche market.
But they made a warning to the sector. The sector didn't respond. And then they shut it down while they got the sector to pull up their socks. I mentioned cash interest rates on investment platforms. Um, you know, that was something that they talked to the sector about in the name of the consumer duty. Um, but then once they were asked to sort of redirect their attentions towards supporting growth, um, that just sucked all the air out of consumer duty.
And there seems to me a timidity from the FCA to upset the industry. So, you know, that combined with, you know, the ending of the name and shame proposals means they're using voluntary requirements a lot more and doing their enforcement behind closed doors.
But they made a warning to the sector. The sector didn't respond. And then they shut it down while they got the sector to pull up their socks. I mentioned cash interest rates on investment platforms. Um, you know, that was something that they talked to the sector about in the name of the consumer duty. Um, but then once they were asked to sort of redirect their attentions towards supporting growth, um, that just sucked all the air out of consumer duty.
And there seems to me a timidity from the FCA to upset the industry. So, you know, that combined with, you know, the ending of the name and shame proposals means they're using voluntary requirements a lot more and doing their enforcement behind closed doors.
14:49
14:49
Speaker 2
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Speaker 2
Yeah, absolutely. I think, um, you know, I have great respect for the FCA. I mean, the FCA engaged with our organisation to quite a large extent. We were speaking at their conference a couple of weeks ago, and some of their team have said they'll come and shadow in our organisation, which is really positive. I think the challenge is the consumer duty is still very new and the pillars are going to be really difficult to achieve. So particularly in the age of AI, and I'm sure we'll come on to that.
But if you're gaining customer understanding, how can you gain customer understanding under AI to the full extent?And also customer support?So how can you ensure ensure that you're doing that properly through AI?So with the growth of AI, that's becoming a considerable issue. So there's other complexities out there that are making it more difficult.
But if you're gaining customer understanding, how can you gain customer understanding under AI to the full extent?And also customer support?So how can you ensure ensure that you're doing that properly through AI?So with the growth of AI, that's becoming a considerable issue. So there's other complexities out there that are making it more difficult.
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Speaker 1
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Speaker 1
Okay. Well thank you for that. So I want to move on to the Financial Ombudsman Service, something that this committee has looked at before. And my final question from me before I pass to Mr. Grady, is, who do you think will be the main losers?From the changes proposed?The reforms changes, whatever you want to call them, to the Financial Ombudsman Service as outlined in the bill. Rocio Concha.
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Speaker 5
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Speaker 5
Consumers clearly. So if you think about the reforms that have been proposed in the bill, you start with a fair and reasonable test. So what is in the bill?Remove the ability of the fox to take impartial decisions. If you look as close to a. The mill made the Fox default decision against the consumer because according to that clause, the fox will only allow, you know, to be favoured in the consumers if they found that the company have breached a rule or.
Or they are no rules. Also, the reform puts so high administrative burden in the Fox that they will be very worried about potential judicial reviews about the process. So somehow the Treasury have made the decision or think that individual consumers are far too powerful for the financial service and the financial service needs protection in a sector. I think someone mentioned already the risk of harm is very high. We are talking about complex products and we are thinking about a sector where we still don't know how, as more AI is embedded into the sector, whether actually the specific rules that we have are fit for purpose.
And despite that, they decide that this change was necessary. Can I also say that what is the evidence?There is nothing in the public domain. You may have some evidence that is private evidence that you receive. We have not seen any evidence in the public domain that this change is necessary to fix any problems in the Fox. So this is also bad policy making. And I will say that I have been working at which for eight, nine years, involved in discussions about different sectors.
And this is probably the most anti-consumer change that I have seen.
Or they are no rules. Also, the reform puts so high administrative burden in the Fox that they will be very worried about potential judicial reviews about the process. So somehow the Treasury have made the decision or think that individual consumers are far too powerful for the financial service and the financial service needs protection in a sector. I think someone mentioned already the risk of harm is very high. We are talking about complex products and we are thinking about a sector where we still don't know how, as more AI is embedded into the sector, whether actually the specific rules that we have are fit for purpose.
And despite that, they decide that this change was necessary. Can I also say that what is the evidence?There is nothing in the public domain. You may have some evidence that is private evidence that you receive. We have not seen any evidence in the public domain that this change is necessary to fix any problems in the Fox. So this is also bad policy making. And I will say that I have been working at which for eight, nine years, involved in discussions about different sectors.
And this is probably the most anti-consumer change that I have seen.
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Speaker 3
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Speaker 3
Ultimately there's going to be a referral mechanism, as you know. And I think the great worry is that every time a principle is relied upon, the fox has to refer that up to the FCA that could, you know, and obviously the FCA is moving to a more principles based approach with consumer duty. So this kind of idea of certainty that the industry is looking for does not exist. The other thing that's really important to say that we didn't didn't mention is I think the ten year time bar is a significant undermining of consumer protections as nature of financial services mean.
Some people are unaware. And that's why we have the rules that we have now that say, within three years of when you're aware. Um, so yeah.
Some people are unaware. And that's why we have the rules that we have now that say, within three years of when you're aware. Um, so yeah.
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14:54
Speaker 2
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Speaker 2
Uh, agreeing also think consumer confidence is extremely important and they have to be confident in the independence. And I think that's something that's going to be really compromised. And I know this government wants to create growth. So to create growth, then people need to be confident in the sector. And I think if they don't feel there's an option. For them to gain that kind of independent kind of redress that's going to affect that.
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Speaker 6
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Speaker 6
Um, agree with all of the areas outlined. I think it's just kind of two pieces of evidence I'd thrown in. Throw in one is that the FCA's Financial Lives survey found 57% of people attempting to complain, found it difficult, or were unable to complain at all. Within the financial services sector. And as Rocio said, there's very little evidence in the public domain about why there was a problem with Foz in terms of consumers having too much power. So if you balance those two.
I'm also unclear why we've ended in a place where we're reducing consumers access to redress and not making it easier.
I'm also unclear why we've ended in a place where we're reducing consumers access to redress and not making it easier.
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Speaker 7
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Speaker 7
Okay. And on. Miss Rennie raised the question of the independence of the Fos, and the chair. Um. And so I'm picking up concerns about the strength of the chair's independence in terms of a proposal to give the chair more independence and to chair to be demonstrably independent. Um, what would you do?You think it's a good idea that this committee have some form of veto or approval, right. On the appointment of the chair I start with Miss Concha.
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Speaker 3
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Speaker 3
Well, yes. Only that, you know, if this becomes a political appointment. And when we saw what happened with the chair of the CMA, um, the Chancellor sort of made a virtue of the fact that she fired him for not being pro-business enough, um, when actually he was incredibly moderate and professional candidate. You know, I don't think we need a political appointee for the Ombudsman. It's meant to be a representative for, you know, consumers and industry. Um, but, but not a patsy of the government.
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15:00
Speaker 2
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Speaker 2
Yeah. And we absolutely agree with that. Um, it's absolutely essential that this committee is involved in the appointment. Consumers are already feeling that um you know, basically government's not on their side in a lot of cases. And I think there needs to be that level of independence to ensure there's nothing happening to affect their outcomes in the redress. Um, that's not being completely scrutinised and I think looked into. So I think that's really important.
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Speaker 8
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Speaker 8
Yes, I want to turn to the Consumer Credit Act and what should be reformed there. I have to declare I was economic Secretary for, for for a while. And even back in 20 2021, Treasury officials were bringing me sort of plans to look at this. And I think in Sara Pritchard's evidence to the committee, um, recently, there was a suggestion that, you know, this legislation that formed originally in 1974 has had lots of different, uh, changes to it is, is out of date and doesn't reflect the changes in consumer behavior in the market and technology.
And I'm getting to a question, but May 26th, May last month, the policy statement of the government of the Treasury says that it repeals the statutory information requirements and recast them into flexible, outcomes focused FCA rules. Does that actually seem to be a reasonable way of coming to terms with the fact that this legislation has been gone through lots of iterations and amendments in different acts since 1974, that the world of consumer protection has changed considerably, and actually, for all the times when we know we buy a product and we scroll through loads of stuff and just click it, and it's all a bit meaningless.
So to me, this sounds like a sensible way forward. I just wondering, what are your views on the reforms proposed and if you're apprehensive about it, please explain as specifically as you can why you're concerned completely.
And I'm getting to a question, but May 26th, May last month, the policy statement of the government of the Treasury says that it repeals the statutory information requirements and recast them into flexible, outcomes focused FCA rules. Does that actually seem to be a reasonable way of coming to terms with the fact that this legislation has been gone through lots of iterations and amendments in different acts since 1974, that the world of consumer protection has changed considerably, and actually, for all the times when we know we buy a product and we scroll through loads of stuff and just click it, and it's all a bit meaningless.
So to me, this sounds like a sensible way forward. I just wondering, what are your views on the reforms proposed and if you're apprehensive about it, please explain as specifically as you can why you're concerned completely.
15:02
Speaker 5
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Speaker 5
Agree that this is an area for reform. The problem that we face is that at the moment, what the bill does is say, well, we are taking this from primary legislation and putting it in the in the rules, but we have not seen how these rules are going to be in secondary. So they have not been consultation about this. So it's impossible to feel comfortable with that change when you don't know what is going to be in the rules. And there is another area, which is the sanctions that, as you know, this automatic sanctions that are there that protect consumers, that maybe they have not received the right information, the, you know, the credit agreement is not enforceable.
Now, you could have, you know, Treasury could have put in the bill something a little bit more proportional that, say, protect the principle there and leave the details to the FCA. So these details can be updated as necessary at this level. But at the moment we are this is a blank cheque because you don't really know which rules will be implemented in secondary legislation.
Now, you could have, you know, Treasury could have put in the bill something a little bit more proportional that, say, protect the principle there and leave the details to the FCA. So these details can be updated as necessary at this level. But at the moment we are this is a blank cheque because you don't really know which rules will be implemented in secondary legislation.
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Speaker 8
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Speaker 8
Will be protections going that you're anxious about. Um, can I just observe that there's been a lot of commentary and we get it from industry that they would say, look, you know, if we are going to really experience a level of growth in this industry, we need to reset the balance of responsibilities in society. People need to take more responsibility for risk when they buy consumer products. And we've discussed in your previous answers the failings of all the ambiguities remaining in the way that the FCA do the consumer duty.
But how do we ever get to that point if we're all the time seeking to bring, you know, ever?More another realm of very, very detailed, prescriptive rules rather than a principle based approach?Is it possible to or do you not think it's desirable to reset the responsibilities to the consumer a bit in terms of taking ownership of risk based decisions with financial products?
But how do we ever get to that point if we're all the time seeking to bring, you know, ever?More another realm of very, very detailed, prescriptive rules rather than a principle based approach?Is it possible to or do you not think it's desirable to reset the responsibilities to the consumer a bit in terms of taking ownership of risk based decisions with financial products?
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Speaker 5
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Speaker 5
I think that this is a complex sector. All these products, financial services are quite complex. I honestly don't think that consumers are over protected. I don't see that. Do I agree that consumers have to take responsibilities?Yes. But for them to take responsibility, they have to have access to accurate information. So, so and I, I agree that in some areas of the regulation has to be principle based. I said that I'm happy with the consumer duty, but I have to be enforced.
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Speaker 8
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Speaker 8
Because I just think you'll sort of contradict yourself. You're okay with the principle based consumer duty or the principle based approach, but then immediately pivot into anxiety over the lack of comprehensiveness of what that means. Is it possible?I mean, because we either we go to a French system where every single thing will be put into, codified into law, and then we'll have more and more legal challenges, which will then presumably the industry won't like that. How can you honestly say that you can have those two things together?I mean, that very respectfully.
I'm just trying.
I'm just trying.
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Speaker 5
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Speaker 5
To get no, no, no, no, it's fine. And I'm probably I'm not explaining myself. I mean, um, the, the point that I was making is in relation to the Consumer Credit Act. Yes. It makes sense to take some of what is in the act into the rules to give it more flexibility. Yeah. How that rules will look, I don't know, because they have no been a consultation or a debate on this. However, there are certain things that you cannot put in the rules legally.
You can't, which is that default sanctions is that is that.
You can't, which is that default sanctions is that is that.
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Speaker 6
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Speaker 6
Yeah, sure. I think um I don't want to repeat too much of, uh, Rocio said, but like similarly, like broadly support the decision to move away from the outdated kind of prescriptive rules in the consumer credit act and move it into FCA regulation, it makes a lot of sense. But like similarly to Rocio, like concerned about, well, we can't replicate some of those things within FCA, legislation, regulation, even if the FCA then decided that they were needed. Um, and then also, yeah, like there's lots of areas, uh, like terminate early termination rights where we just don't, we don't know their important protections to consumers, open to them changing within the FCA regime, but we don't know what those look like.
So it's quite hard to be able to confidently say we're comfortable with these being removed from legislation until we know what they're being replaced with. Um, and then the only final thing I'd say is like, we were really relieved that the government decided to postpone the phase two. So where some of the other protections, which are really key to consumers are. So, I mean, overall supportive, but there are some really key areas where we're worried.
So it's quite hard to be able to confidently say we're comfortable with these being removed from legislation until we know what they're being replaced with. Um, and then the only final thing I'd say is like, we were really relieved that the government decided to postpone the phase two. So where some of the other protections, which are really key to consumers are. So, I mean, overall supportive, but there are some really key areas where we're worried.
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Speaker 2
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Speaker 2
Yeah, we just wanted to really express how pleased we are when we responded to the consultation. And there were various areas that we wanted covered. Uh, we absolutely think that this should change, that we should move across from the, an old act that's severely outdated to, to new processes. And some of our concerns was the gap between the old way and the new way. And I think that was addressed when I read the paper that we looked at addressing that gap.
So that was a key area that we were really concerned about. And also section 75 and 140 not being addressed at this point, which were two of our major concerns. And I think I could have that completely wrong. I see you're looking at your paper, but I think they're the they were the numbers, but they were the ones that were not being tackled at the moment, but also the aspect of where there's criminality. I think that as well is still remaining where it should be at the moment.
So not to say they won't be addressed in the future, but I guess I'm more positive because I saw everything in our consultation response being dealt with within the proposals.
So that was a key area that we were really concerned about. And also section 75 and 140 not being addressed at this point, which were two of our major concerns. And I think I could have that completely wrong. I see you're looking at your paper, but I think they're the they were the numbers, but they were the ones that were not being tackled at the moment, but also the aspect of where there's criminality. I think that as well is still remaining where it should be at the moment.
So not to say they won't be addressed in the future, but I guess I'm more positive because I saw everything in our consultation response being dealt with within the proposals.
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Speaker 8
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Speaker 8
Okay, Mr. Daly, is there anything you'd like to add on this?I mean, I want to sort of get this heart that you were talking about consumer duty before and the FCA obviously got quite a significant supervisory, um, toolkit. Would you like to sort of comment on where that sits alongside this reform and how you see it working together?
15:09
Speaker 3
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Speaker 3
Yeah, I mean, I'm more optimistic about, um, where this is headed. We have had some dialogue with the FCA and Firms and Consumer Credit Act has been quite unhelpful, particularly in terms of what it mandates firms to disclose to customer. It makes it very clunky and difficult. Um, so, you know, I think that moving to more of a principles based consumer duty regime should give consumers, you know, all the protections they have and remove this kind of two tier system. Um, so, so broadly, I'm in support of that, but I think, you know, you know, if we're going to have that, that just underlines the importance of the ombudsman being robust because, you know, if we're going to lose some of those protections that sit on the statute at the moment, then the Ombudsman does need to be, you know, ready to to step in to be able to provide fair outcomes for customers when things go wrong.
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Speaker 8
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Speaker 8
About the the two with the Ombudsman, the way it works is that, in essence, individual decisions are made. There seem to give precedence, even though they're supposed to treat them all individually, and they actually store up lots of unresolved matters for certain sections of the industry. Is that not the reality of what's happened hitherto?
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Speaker 3
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Speaker 3
Yeah, I think I think they are mistaken. Firstly, firstly, firms firms overanalyze each Ombudsman decision. And I do think one of the positive things to come out of this, it didn't need legislation was there's going to be more thematic reports from the Ombudsman talking about trends that are emerging, and hopefully that will stop people overanalyzing each decision. But 2 or 3 decisions can look quite similar and have small nuances in them that might indicate an ombudsman. This customer wasn't treated fairly and reasonably.
Um, you know, now we're going to be caught in this strange referral mechanism. And I do as we've discussed, I think before you came in, we worry about where that's going to end.
Um, you know, now we're going to be caught in this strange referral mechanism. And I do as we've discussed, I think before you came in, we worry about where that's going to end.
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Speaker 9
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Speaker 9
So for consumers, one of the most important things that they have had to deal with over the last few years has been their mortgage. And the fact that so many low rate, fixed term mortgages have come to an end, and they're now having to pay much higher rates. And I just wondered, starting with Ann Pardo, if you think there's anything in the bill that will help people who pay mortgages.
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Speaker 3
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Speaker 3
Yeah. I mean, I think generally the the direction of travel is more to allow consumers to take more risk. That's been the direction from government to the FCA. And we've seen, you know, loosening of the, the rules. Um, so consumers are being encouraged to take more risk at the moment. There's nothing in the bill which addresses that. Um, there was a sort of voluntary industry agreement. Was it called the mortgage charter. You know, that's now been withdrawn.
So that was there to sort of ensure that lenders provided some forbearance to customers when they struggle with.
So that was there to sort of ensure that lenders provided some forbearance to customers when they struggle with.
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Speaker 3
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Speaker 3
I'm not sure it was. It was massively impactful, really. Um, but I think, you know, if we are going to try and inject more risk into the system, then we have to accept there's going to be more defaults, more repossessions. And, uh, you know, we have to question whether that's desirable and whether we want to we want to do that. You know, I would say that we've been quite fortunate to have very few repossessions in this country over the last 20 years.
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Speaker 3
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Speaker 3
I'm not sure about that. Um, I'm not a prudential regulatory specialist, but, um, you know, I've certainly followed some of the commentary that raises questions about whether undoing protections that have been around less than ten years and were put in to try and prevent another financial crisis, uh, is the right thing to do. Um, you know, including the CEO of Barclays.
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Speaker 10
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Speaker 10
Been the access by first time buyers to mortgages. Um, and so to your point about relaxing some of the regulations, um, we've, uh, the committee has been actively in. Um, talking to the PRA about um, um, relaxing the loan to income flow limits, um, to allow more flexibility for first time buyers. Would you see?That as a good thing?
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Speaker 3
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Speaker 3
I think, I think at the margins, there are places where, you know, people probably didn't fit the box neatly. And so they weren't getting access to credit, that they probably should have been given access to. That's fine. Um, you know, I think there has been heavier. Pressure than that from the Treasury to try and allow people to borrow more where perhaps it isn't advisable. And, you know, if we don't see the kind of house price inflation that we saw over the last 20 or 30 years, you end up with people in negative equity unable to move and potentially a rise in repossessions.
So, um, you know, I think the rules we have have been put in place, you know, we didn't experience the financial crisis in the same way the US did.
So, um, you know, I think the rules we have have been put in place, you know, we didn't experience the financial crisis in the same way the US did.
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Speaker 4
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Speaker 4
But renting is not a one way street, is it?I mean, you know, you, you still have your, your costs covered. There are significant additional costs that come with owning a home. But yeah, sure. For some people, um, you know, there may have been barriers in terms of the restrictions on, um, affordability that prevented them. And I think the FCA has tried to make sensible tweaks there. I don't think we've seen, you know, a massive shift yet, but I worry about some of the the rhetoric coming out of the Treasury that suggests that they might want the FCA to go further.
And I think the chief executive of the FCA has pushed back to you and said, well, what do you how much risk do you want us to take?Because there will be casualties. And I'd reiterate that.
And I think the chief executive of the FCA has pushed back to you and said, well, what do you how much risk do you want us to take?Because there will be casualties. And I'd reiterate that.
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Speaker 5
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Speaker 5
Thank you chair. Um, the FCA recently released their strategy and it includes a section about helping consumers. Um, they've stated some priorities about access to credit, debt support and redress. I just wondered, perhaps I could start with you, Miss Pardoe, about what you made of the strategy, uh, what you made of the priorities, if anything is missing from it.
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Speaker 7
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Speaker 7
Well, thanks very much. Um, we welcome the FCA's new strategy. Um, and there's some good things in there. I think, like overall, as we've sort of touched on throughout, particularly James, it does reflect kind of those priorities of government around, um, kind of innovation. Um, resilience savings and support from firms, um, as well is in there. Um, so it definitely is a strategy which reflects, uh, the government's current priorities. I think like what I'd say is that there isn't a whole lot in there around sort of acting quickly in the face of, uh, harm being caused to consumers.
Um, we're not against kind of more risk being taken in areas where it's safe, but with more risk comes with more risk of harm to people as well. So in executing this strategy, we want the FCA to be really kind of nimble, using the consumer duty to make sure that it delivers a really good outcome, improved outcomes for consumers. The risk with the consumer duty, that's to kind of focused on management information reports and kind of board discussions. We need to make sure that FCA is kind of really got its eye on, is this, uh, is the market delivering good outcomes for consumers, um, in its operation and also kind of acting quickly, uh, where we have, um, emerging harm in terms of areas we'd like to see the FCA focus.
It's where consumers are really quite exposed at the moment. So FCA has previously done work on scams. We'd like to see that continue complaints and address uh, sorry, complaints and redress. Um also kind of arrears. Um citizens advice we're sort of really worried about kind of what the impacts on, of the cost of living will be of the kind of conflict that we've seen in Iran. We'll see that kind of, um, coming through. So it'll be really important that the FCA is on top of making sure that firms are kind of doing everything that they can to support their customers through that and come out the other side.
Um, so overall, there's quite a lot of focus on, um, helping confident consumers to participate, um, and increase their sort of savings and sort of take more risks, but there's like more gaps in there around consumers who are in difficulty now and really need support. Um, so kind of a balanced picture on the FCA strategy.
Um, we're not against kind of more risk being taken in areas where it's safe, but with more risk comes with more risk of harm to people as well. So in executing this strategy, we want the FCA to be really kind of nimble, using the consumer duty to make sure that it delivers a really good outcome, improved outcomes for consumers. The risk with the consumer duty, that's to kind of focused on management information reports and kind of board discussions. We need to make sure that FCA is kind of really got its eye on, is this, uh, is the market delivering good outcomes for consumers, um, in its operation and also kind of acting quickly, uh, where we have, um, emerging harm in terms of areas we'd like to see the FCA focus.
It's where consumers are really quite exposed at the moment. So FCA has previously done work on scams. We'd like to see that continue complaints and address uh, sorry, complaints and redress. Um also kind of arrears. Um citizens advice we're sort of really worried about kind of what the impacts on, of the cost of living will be of the kind of conflict that we've seen in Iran. We'll see that kind of, um, coming through. So it'll be really important that the FCA is on top of making sure that firms are kind of doing everything that they can to support their customers through that and come out the other side.
Um, so overall, there's quite a lot of focus on, um, helping confident consumers to participate, um, and increase their sort of savings and sort of take more risks, but there's like more gaps in there around consumers who are in difficulty now and really need support. Um, so kind of a balanced picture on the FCA strategy.
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Speaker 5
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Speaker 5
It sounds a bit like they're talking the talk, but you're worried about whether they'll be able to walk the walk. And I think I know if it was you that made. Earlier about where the consumer duty sets the bar versus where they're missing it. I mean, right in front of this committee before and said that some of the reasons they're not able to respond to emerging harms is because a lot of it relies on legislation. And so they feel like they can't act quickly enough.
Buy now, pay later, which I'm sure we'll get into details later on about being an example of that. Do you buy that, or do you think their powers within the consumer duty already that they need to act more swiftly upon?
Buy now, pay later, which I'm sure we'll get into details later on about being an example of that. Do you buy that, or do you think their powers within the consumer duty already that they need to act more swiftly upon?
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Speaker 6
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Speaker 6
I mean, they have a lot of power on the consumer duty to do far more proactively. And actually looking at the harms proactively rather than reacting to problems. So in the financial service, they definitely they are constraints on buy now, pay later. For example, it took ages to get into the, you know, the regulations are coming up that that is true on a scam, for example, that I mentioned there. Um, they are doing a lot actually the FCA, but actually the FCA doesn't have the powers to deal with a lot of other problems that are related to what they are doing, which is about the big tech, because a lot of these scams start on social media, and that is the Ofcom and the government appetite to make sure that the right regulations are in place.
So I think that there is plenty out there for them to do with the current powers, and yet there are some areas where actually they don't have the power because the power is on other regulators or the government to be, you know, for example, on scams to take a more holistic approach on all this.
So I think that there is plenty out there for them to do with the current powers, and yet there are some areas where actually they don't have the power because the power is on other regulators or the government to be, you know, for example, on scams to take a more holistic approach on all this.
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Speaker 4
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Speaker 4
Well, there was certainly a lot of activity when the consumer duty came in. Um, you know, a lot of firms have done some of the work. They've improved some of their communications, they've improved the clarity of information they're giving to, to consumers in some markets. But then there are much broader and bigger industry wide issues where, you know, everybody still acting the way they were before, and they're waiting to see whether the regulator says this is on the wrong side of the line when it comes to consumer duty.
I mean, the credit card market, um, would be, you know, top of my list as an example, uh, you know, ultimately 0% credit cards, um, are paid for by the least financially resilient households who end up paying April of 25 plus percent. And the balance transfer fees that are paid by, um, everybody don't cover the cost of that loan. Uh, and so they, they need the least financially resilient customers to lapse at the end of the credit card deal and then carry on paying interest at very high amounts.
That's how the model works. You know, I don't think that meets the FCA's fair value rules. The FCA has chosen to say that's a social issue. It's something for government to discuss. I don't think that's a social issue. I mean, the FCA decided to intervene on overdrafts because it felt unauthorised overdraft fees were disproportionately hitting the least financially resilient households. I think their thinking, you know, the Chancellor is telling us to go easy on industry right now.
We're not going to open this can of worms. And there's a million examples like that where, you know, insurance pricing is another one. Um, they say it's a social issue and, you know, but they could look at it premium finance, the head of insurance referred to it as a tax on the poor. And then when they concluded their market study, they did nothing. Um, so there's definitely been a change in emphasis in there driven by the treasury. Um, and I don't think I've ever noticed that at any other time since the FSA or FCA has been around.
I mean, the credit card market, um, would be, you know, top of my list as an example, uh, you know, ultimately 0% credit cards, um, are paid for by the least financially resilient households who end up paying April of 25 plus percent. And the balance transfer fees that are paid by, um, everybody don't cover the cost of that loan. Uh, and so they, they need the least financially resilient customers to lapse at the end of the credit card deal and then carry on paying interest at very high amounts.
That's how the model works. You know, I don't think that meets the FCA's fair value rules. The FCA has chosen to say that's a social issue. It's something for government to discuss. I don't think that's a social issue. I mean, the FCA decided to intervene on overdrafts because it felt unauthorised overdraft fees were disproportionately hitting the least financially resilient households. I think their thinking, you know, the Chancellor is telling us to go easy on industry right now.
We're not going to open this can of worms. And there's a million examples like that where, you know, insurance pricing is another one. Um, they say it's a social issue and, you know, but they could look at it premium finance, the head of insurance referred to it as a tax on the poor. And then when they concluded their market study, they did nothing. Um, so there's definitely been a change in emphasis in there driven by the treasury. Um, and I don't think I've ever noticed that at any other time since the FSA or FCA has been around.
15:26
Speaker 5
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Speaker 5
To come back in but um do you think there has been a change since there's been a change of government, or at least since the Chancellor stated this intention about wanting to get the boot of the regulators off the necks of industry, do you think. Definitely a stark change from from that moment in terms of the FCA's attitude, or do you think it's just always been.
15:26
Speaker 6
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Speaker 6
Well, I think that definitely the narrative, the message sent to the regulators is have been be careful about enforcing the regulation, have been upsetting the industry. And there's definitely have constrained the appetite of many regulators. And that include the FCA. Absolutely. We have seen that. Um and there have been plenty of opportunities for the FCA to actually really apply the consumer duty and examples that James mentioned, and they have not done it. And the reason, because they have not done it is because of that, because that pressure and that don't overstate because otherwise, you know, you saw what happened with the CMA.
So clear message there. Don't be too ambitious as a regulator to deliver your duty.
So clear message there. Don't be too ambitious as a regulator to deliver your duty.
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Speaker 4
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Speaker 4
Yeah, I think there was a failure in a way, the original protections were written back in the original Financial Services and Markets Act, which were meant to protect consumers. Uh, and then when Mr. Glen and his colleagues legislated to bring the funeral plan market into full statutory, we did want that. And it was the right thing to do. It inevitably ended up leading to the collapse of some of the bad actors in the market. Um, you know, I think that there is some failure that sits in government in the way those original rules were written.
Many of the victims are now dying without the funerals they paid for. Uh, and they've never really had their day in court. I know there's an ongoing series fraud office investigation, but I think there is something for a committee like this to look at, um, to really understand what happened, how so many tens of thousands of people never got the funerals they paid for. Um, so, um, I. I would, I would very much like to see the Treasury Committee look at that in due course.
Many of the victims are now dying without the funerals they paid for. Uh, and they've never really had their day in court. I know there's an ongoing series fraud office investigation, but I think there is something for a committee like this to look at, um, to really understand what happened, how so many tens of thousands of people never got the funerals they paid for. Um, so, um, I. I would, I would very much like to see the Treasury Committee look at that in due course.
15:28
15:28
Speaker 9
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Speaker 9
Could we turn to motor finance, please?Um now the motor finance redress scheme is projected to cost 9.1 billion. Now if a consumer agreed a monthly payment that met their needs and received full use of the vehicle and, they perhaps gone on for many years, maybe ten years, um, carry on doing that. How do you sort of reconcile that reality where they didn't express any anxiety over that?They made a decision over the trade off between the interest monthly payment they could afford to pay and the deposit with the concept of.
Consumer harm, because I accept that in legislation, that's what's deemed to have been happened here. But isn't this an area where there. Was no responsibility on the consumer to. You know, presumably you could ask questions about what made up that payment. Um, they, you know, do you not think that there's something that's gone wrong here, given the impact that this will have on, on, you know, instability in some of these institutions?I can see Mr. Daley relishing to say no, but.
Consumer harm, because I accept that in legislation, that's what's deemed to have been happened here. But isn't this an area where there. Was no responsibility on the consumer to. You know, presumably you could ask questions about what made up that payment. Um, they, you know, do you not think that there's something that's gone wrong here, given the impact that this will have on, on, you know, instability in some of these institutions?I can see Mr. Daley relishing to say no, but.
15:29
Speaker 4
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Speaker 4
No, I actually agree. You know what?I actually agree with you. And it's not a you know, it's not a it's not a popular view. But but the fact is, you know, there was a failure. And, you know, in under the eyes of the law. And so there now needs to be redressed. And, you know, the matter is now well socialised. And most of the people who were victims of this are aware of it.
You know, I agree with you that there does have to be an element of consumer responsibility. And in this case, many consumers were free to take another choice and didn't. But, you know, that's why I think we need to kind of clear up the ambiguity between the statute and the regulator and ensure that we don't have this kind of thing. Again.
You know, I agree with you that there does have to be an element of consumer responsibility. And in this case, many consumers were free to take another choice and didn't. But, you know, that's why I think we need to kind of clear up the ambiguity between the statute and the regulator and ensure that we don't have this kind of thing. Again.
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Speaker 5
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Speaker 5
You made a point. This country made a point earlier on about, you know, consumers are able to take responsibility if they've got good information, if they get given bad information, that's where the harm is being done. But I won't open that whole can of worms. I just want to kind of reflect on where we've got to. And this latest delay, um, what do we think the impact of this delay to the scheme being rolled out means for consumers?I'm not sure if anybody's got a special interest in this or wants to come in on.
So I'm looking at anybody to provide comment about the the delay to the FCA, uh, scheme.
So I'm looking at anybody to provide comment about the the delay to the FCA, uh, scheme.
15:32
15:32
Speaker 6
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Speaker 6
The impact is delays. Actually, I think that the FCA put forward, uh, a proposal that, you know, to, to deal with this issue, which is systemic. And now, because there are challenges on both sides of the argument, what we are facing is more delay. And from our perspective, what we want is the FCA. Uh, what they have proposed to be put in place and consumers getting their money back.
15:32
Speaker 5
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Speaker 5
Do you think the priority for most consumers is they just get their money back in a timely fashion, because you've kind of got two sides to the debate. As you said, you've got you've got some motor firms, notably, not some of the bigger, um, finance providers, but some, some of the firms challenging. And then you've got a consumer group challenging as well on the basis they can get more money from the courts. And you're saying that for most consumers, they'd prefer to get the money quickly rather than wait for the possibility of getting more.
More.
More.
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15:34
Speaker 4
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Speaker 4
Yeah. I mean, I really disagree. And, uh, I think that, you know, you say it's a consumer group. It's a, you know, it's a legal group ultimately that is, you know, fighting the other side of it because there's money to be made there. Um, as claimant lawyers. And, you know, I think actually the fact that you've got these two sides fighting probably makes the point that this redress scheme is pretty fair. Um, and, you know, consumers may or may not get more.
And the worst case scenario here is that there is no scheme. And then what we end up now is total chaos. And it cost the industry more money. And it becomes much harder for consumers to get their address. And I don't think that's in anybody's interest. So, um, yeah.
And the worst case scenario here is that there is no scheme. And then what we end up now is total chaos. And it cost the industry more money. And it becomes much harder for consumers to get their address. And I don't think that's in anybody's interest. So, um, yeah.
15:35
Speaker 5
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Speaker 5
I will come to the others, but can I just ask one more question?You can answer both at once if you want to come in, which is about the claims management firms that you've mentioned. Um, there are lots of bad operators out there in the market at the moment that's been well highlighted by the FCA, but some claims management firms would say if it wasn't for them, this issue would not be in the public domain in the first place as well because they've, you know, got consumers go, what do you what do you think about the FCA's focus on, um, claims management companies at the moment, and how do you think the industry needs to change to work better for consumers?
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15:35
Speaker 4
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Speaker 4
I mean, I agree with their focus on claims management companies. I'm glad that the Ombudsman introduced a case fee for them, because I think they were clogging up the system. I do understand there's a legitimate use for claims management firms for consumers, and they can help people get redress where they might not otherwise have done it. Um, but the vast majority of people, you know, are able to use services like the Ombudsman for free. Um, and claims management firms take fees that I think are disproportionate to the effort they put in.
So I certainly welcome the FCA's market study and let's see what comes out of it.
So I certainly welcome the FCA's market study and let's see what comes out of it.
15:36
Speaker 9
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Speaker 9
I just on that particular. 36% is estimated up to 36% of this 9.1 billion is going to go to the claims management firm. When Nikhil Rathi said to us, you know, there's no need for any intermediary cost. I mean, do you not think there needs to be a bit more robustness from the FCA in sort of dealing with these cmcs.
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Speaker 7
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Speaker 7
Okay. Well, I mean, I'll be very brief. Um. I mean, yes, I, I don't have much to say on the redress scheme, I think, um agree. That one of the impacts of the delay is the predatory behaviour of claims management companies. And the FCA is absolutely right to look into claims management companies in more detail. I think what I'd say within that review is it's really important that they look at the whole customer journey and not just kind of, um, advertising in terms of the digital journey.
Like one thing we've seen is, um, kind of people being drawn in with an advert that says kind of a free eligibility check, and then they don't realise that they've then progressed into like a paid consultation. There are so many issues here. Like we really support, um, the FCA's action on it. Um, and um, yeah, would encourage them to take strong action, but I think what I'd say is the proliferation of claims management companies is also a symptom of, um, people feeling it's too difficult to make a complaint on their own.
Like one thing we've seen is, um, kind of people being drawn in with an advert that says kind of a free eligibility check, and then they don't realise that they've then progressed into like a paid consultation. There are so many issues here. Like we really support, um, the FCA's action on it. Um, and um, yeah, would encourage them to take strong action, but I think what I'd say is the proliferation of claims management companies is also a symptom of, um, people feeling it's too difficult to make a complaint on their own.
15:39
15:39
Speaker 3
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Speaker 3
Yeah. I mean, I'm really just said in. The claims management companies, I mean people are probably getting this on their feed constantly. So the reason this needs to be resolved as quickly as possible is the amount of people who are getting fallen into risk now, because they're probably looking for the money down the line. And they're starting to say, well, I need to pursue something. But if you actually go into Google and you even if you just keyed in something relevant to this, you would be hit with about 40 different companies who are trying to sell you claims management.
So it's really important that this is properly regulated and looked into. But also one of my biggest concerns is that the public are actually getting their advice on this issue through the media. And actually it should be coming directly from those who are experts in this area. I think, um, where people can realise a lot of people don't realise they don't need to go through a claims management company unless they've watched that, particularly on some area of the media. And I think that's where we need to get the message out to people not to rush, wait, hold back and don't just rush.
It's not going to make it go any faster. If you go to a claims management company, we still have to follow through this process.
So it's really important that this is properly regulated and looked into. But also one of my biggest concerns is that the public are actually getting their advice on this issue through the media. And actually it should be coming directly from those who are experts in this area. I think, um, where people can realise a lot of people don't realise they don't need to go through a claims management company unless they've watched that, particularly on some area of the media. And I think that's where we need to get the message out to people not to rush, wait, hold back and don't just rush.
It's not going to make it go any faster. If you go to a claims management company, we still have to follow through this process.
15:41
15:41
Speaker 9
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Speaker 9
Yes. Um, can we turn now to the issue of targeted support and simplified financial advice?This is a complicated area where clearly there's financial harm from people putting too much money in the wrong places, but there's obviously risks associated with that. It occurs to the committee we've got financial advice, financial guidance, targeted support. And I think Sarah Pritchard said that working on simplified forms of advice. What's your view on the complexity of this landscape?I think the research shows that 63% of financial firms don't plan to offer targeted support.
So specifically on targeted support, where do you think this is going to add some value and where is it still going to leave some gaps?
So specifically on targeted support, where do you think this is going to add some value and where is it still going to leave some gaps?
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15:42
Speaker 4
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Speaker 4
Um, I mean, I think broadly speaking, uh, you know, we're in favour of the concept because there's clearly a big advice gap. And at the moment you've got guidance on one side and advice on the other, and a lot of people not getting support that they need. Um, so these seem sort of sensible ideas to try and plug that gap. I'm not sure that actually, um, you know, getting people to redirect their cash savings into investments is the most pressing priority. I mean, it may be for the Treasury, but I think there are lots of other areas where, um, targeted support could be really helpful, you know, around protection, around general insurance.
And I look forward to seeing it rolled out in those areas in terms of the different tiers. You know, I take your point and, you know, I've already said sort of complexity is a barrier. Um, you know, in the context of the Isa reforms. So if we can find a way to simplify this, um, then, then great. But, you know, the important thing is all of this is going to be a waste of time if consumers don't trust it. And so we need to make sure that it's implemented in a way that consumers are able to understand what is happening in the black box that tells them, this is a good idea for you.
And obviously, we're still very early days. We haven't really seen any of these out in the wild yet, but we're talking to some firms to try and help them with creating a trusted journey.
And I look forward to seeing it rolled out in those areas in terms of the different tiers. You know, I take your point and, you know, I've already said sort of complexity is a barrier. Um, you know, in the context of the Isa reforms. So if we can find a way to simplify this, um, then, then great. But, you know, the important thing is all of this is going to be a waste of time if consumers don't trust it. And so we need to make sure that it's implemented in a way that consumers are able to understand what is happening in the black box that tells them, this is a good idea for you.
And obviously, we're still very early days. We haven't really seen any of these out in the wild yet, but we're talking to some firms to try and help them with creating a trusted journey.
15:43
Speaker 9
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Speaker 9
Do you think it offers any meaningful hope because of the fact that if you look at AI, a lot of people will put their, well, surprising numbers of people say that the. So the Investing and Savings Alliance tell us, put their details into an AI tool to secure. Advice direction on what to. Do with their money and there's no regulation of that. Um. We seem to be anxious about regulating AI because we want to harness the value of it.
But in this particular area, do you see any evidence of harm or other panelists wish to come in, if that would be helpful?
But in this particular area, do you see any evidence of harm or other panelists wish to come in, if that would be helpful?
15:44
Speaker 4
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Speaker 4
Well, I mean, just very quickly, I would say absolutely, there's plenty of harm from AI as it stands at the moment. And ideally, it would be brought within the regulatory perimeter. But in practice, you know, that's going to be very difficult to do if chat open AI or um. Anthropic don't particularly want to have conversations with our financial regulators. As you know, Sheldon Mills is going to be publishing his report on AI on Monday week. Um, we'll be interested to see what it says, but, um, my instinct is that, you know, the onus is going to be in the short run, put on firms to continue to validate that they're delivering good outcomes regardless of where customers have come to them from.
But in the long run, we need to find a better way of regulating this so that we can harness the power of AI to close the information asymmetry gap between consumers and firms.
But in the long run, we need to find a better way of regulating this so that we can harness the power of AI to close the information asymmetry gap between consumers and firms.
15:45
15:45
Speaker 7
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Speaker 7
Um, not particularly on the good or bad and targeted support, but just to, I guess, like on the AI point, I mean, AI offers enormous benefits for people in terms of simplifying information and getting it at the fingertips, but we are certainly are already seeing emerging causes of harm. It's one thing people asking is kind of basic advice about how to budget better, but what we're seeing is people kind of making really risky inquiries of AI and then acting on that. So for example, we saw one client who, um, had kind of basically asked a chatbot for advice on debt advice.
Um, and then had been, as a result of that decision filed for bankruptcy. When he came to us for advice, it was very clear that actually bankruptcy was not the best option for him whatsoever. But it's not reversible. Um, and then I think, um, I think the other flip side of that is what we're seeing is that after taking advice from AI chatbots, people are less trusting of the advice that we give them. So if they've been told some really optimistic advice by a chatbot and then they come to us and go, we've heard we can have this, it's then on our advisors to kind of explain the reality and the nuance of the situation, and that creates real challenges for trust in our advice and kind of encouraging people to act on that.
I mean, but there are there are we're not anti AI. We're using it safely within our own service in terms of helping our advisors to advise people. But we need to make sure that there's kind of the right regulatory framework and accountability within that, which, as James said, is not easy.
Um, and then had been, as a result of that decision filed for bankruptcy. When he came to us for advice, it was very clear that actually bankruptcy was not the best option for him whatsoever. But it's not reversible. Um, and then I think, um, I think the other flip side of that is what we're seeing is that after taking advice from AI chatbots, people are less trusting of the advice that we give them. So if they've been told some really optimistic advice by a chatbot and then they come to us and go, we've heard we can have this, it's then on our advisors to kind of explain the reality and the nuance of the situation, and that creates real challenges for trust in our advice and kind of encouraging people to act on that.
I mean, but there are there are we're not anti AI. We're using it safely within our own service in terms of helping our advisors to advise people. But we need to make sure that there's kind of the right regulatory framework and accountability within that, which, as James said, is not easy.
15:46
Speaker 9
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Speaker 9
I suppose what I'm getting at is that principle of I hear what you said about AI, and that's helpful evidence for us. Thank you. But on the issue of back to targeted advice, and, you know, by allowing firms to essentially offer ready made financial suggestions to some consumer groups, they are sort of giving a better, potentially better outcomes for consumers that otherwise hitherto wouldn't have got them. I'm just a bit apprehensive if the fact that if 63% of firms aren't going to use it, there's still an apprehensiveness about whether they're going to still be, I assume, um, vulnerable to challenge subsequently if it didn't work out the right way.
When you see that dynamic, do you have any concerns about the effectiveness of where this has got to?
When you see that dynamic, do you have any concerns about the effectiveness of where this has got to?
15:46
Speaker 6
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Speaker 6
So is your worry that companies will not provide this because they are worried about the regulatory challenge?But actually the FCA have been quite clear about what they think the targeted support is and how it should apply. So. You know, with them you may and we are seeing a slow kind of process. Yes. Take up the question is why that that slow take off there may be the market commercially is not so attractive. Yeah. Um so we need to, to, you know, to talk to this firm and say why, why they are is not that take off in a way.
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15:47
Speaker 4
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Speaker 4
Yeah, but, but also, you know, is, is financial advisers, right?You know, you wouldn't necessarily expect financial advisers to be the people who are bringing targeted support to the market. You know, the government wants the big firms. I mean, as you know, for the last 20 years, the banks have basically stayed out of investments. Um, certainly in terms of financial advice, because of the sort of the fines that they received in the 2000. So I think the idea is that those people who have major relationships with consumers.
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Speaker 3
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Speaker 3
It's it's really important from the financial inclusion strategy point of view, where we're trying to make sure that people get access to good financial advice. The challenge is that it's expensive for most people, and therefore, having another option would be really positive, and we would support that, but only if when it came to a point where there were specific real concerns there, where there was more targeted advice that was required, that specialist support was there and available. I mean, one of the ways that we're looking at this in Scotland in terms of financial inclusion strategy, is we have a financial wellbeing forum and we actually meet together to look at ways where we can get advice and support out to consumers on these areas like this, to ensure that we're complying with the financial inclusion strategy.
And, um, where although we are not a regulated body and we don't provide regulatory advice, areas like the money and pension services are putting modules up online that people can actually get some form of advice anyway that they can follow.
And, um, where although we are not a regulated body and we don't provide regulatory advice, areas like the money and pension services are putting modules up online that people can actually get some form of advice anyway that they can follow.
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15:49
Speaker 8
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Speaker 8
Yes. Thank you. Actually, that's taken me, Miss Rennie, just exactly where I wanted to kind of wrap this section up on, which is a lot of these reforms are targeted at things like pension savings and things like that. But if you think of my constituency of Glasgow East and other cities in Scotland, um, people need basic help with things like insurance, current accounts, savings accounts, affordable small scale credit, and they need advice on that. Do you think we're getting any closer to a point where people can.
Walk in and get that advice in a local community institution like credit unions?Or do you think we still need to work much harder at that side of things?Yes. Please.
Walk in and get that advice in a local community institution like credit unions?Or do you think we still need to work much harder at that side of things?Yes. Please.
15:50
Speaker 3
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Speaker 3
Yeah. Sorry. Apologies. Yeah. I think, um, you mentioned credit unions there and they're absolutely essential to small communities in Scotland. I think, uh, they are able to give really good advice. Uh, we have a, I live in Clackmannanshire. We've got a small credit union. There's credit unions in the Western Isles, different areas that are able to support the communities in a really strong way, I think, um, and are of great benefit to them.
So there are areas where people can receive good advice and we're moving forward towards that. But I think again, you're probably in a postcode lottery. It depends where you are and whether you're able to get that support in your community.
So there are areas where people can receive good advice and we're moving forward towards that. But I think again, you're probably in a postcode lottery. It depends where you are and whether you're able to get that support in your community.
15:51
15:51
Speaker 3
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Speaker 3
Well, absolutely. I mean, we're in a situation where a lot of consumers won't even take out insurance. You know, we've got insurance being seen as a luxury for a lot of consumers. They feel that they can't. So we had a situation actually locally in my area where houses have started moving and people have all been moved out of their homes and they were uninsured, so they didn't have a lot of them didn't have insurance because, um, they were unable to afford insurance.
And they saw insurance is a luxury. So some of the areas where we're in the high SIMD areas, we really need to make sure that there's appropriate support there for people to be able to access advice on these areas to make them more affordable for them within those areas.
And they saw insurance is a luxury. So some of the areas where we're in the high SIMD areas, we really need to make sure that there's appropriate support there for people to be able to access advice on these areas to make them more affordable for them within those areas.
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Speaker 6
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Speaker 6
So, um, James mentioned before premium finance. Uh, so we're still seeing, uh, very high, uh, interest rates for people that are paying for the, uh. Insurance monthly. The FCA did a review, not much change, actually. We published some numbers. I think that was last week where we are still seeing many companies charging around 29% more. And this is this the people that pay, for example, for the motor insurance, which by the way, is not a luxury because many people use their cars for work.
Uh, they pay monthly because they cannot afford to pay annually. And these people are paying a lot more than you pay annually. That doesn't really make sense. And that is something that actually the FCA have an opportunity to do more about. And they haven't done it. So that's one area, critical area.
Uh, they pay monthly because they cannot afford to pay annually. And these people are paying a lot more than you pay annually. That doesn't really make sense. And that is something that actually the FCA have an opportunity to do more about. And they haven't done it. So that's one area, critical area.
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15:54
Speaker 6
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Speaker 6
So when you read what they produce to justify not intervening more, there is actually no a good rationale not to do it. There is no a good rationale there. And I think that this probably was, again, the lack of appetite of the FCA to intervene in a market because of the whole narrative about. Be careful because of growth and offsetting the market. This is, I think, that this is critical to be addressed because these are the people that actually cannot afford this, and these are the people that end up paying more.
It doesn't really make sense.
It doesn't really make sense.
15:55
Speaker 8
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Speaker 8
Okay. I think it would be helpful to committee if you actually wrote to the committee after this hearing over the next week or two and just set out why you think the rationale of the FCA is wrong, because then we can consider that. Mr. Daly, where do you see the main harms to consumers in the insurance market at the moment?
15:55
Speaker 4
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Speaker 4
Yeah, well, I totally agree with Rocio. And I think also there is a double penalty on those on the lowest incomes because insurers also price them higher because of their higher propensity to claim. That doesn't mean they're higher risk. It just means that if you've got less money, you're less able to pay a small claim out of your pocket. And so then you get priced higher for that as well. So the lowest income households are paying the most for insurance.
And in the worst cases, that means they're unable to have a car because they can't afford to insure themselves. You know, more broadly. And related to that, we need to think. About the fairness of insurance pricing in a more data heavy world where, um, you know, insurers now use already over 400 data points to price on there's no transparency around that. Um, but what we see is, you know, more pockets of consumers where, um, you know, they are priced out of the market because they're deemed too high a risk or they're uninsurable.
Uh, and, you know, this is a social debate we need to have. We all accept the NHS as the fabric of our society. We can live whatever life style we need decide to, uh, and still, um, still. Still have the healthcare tab picked up. Um, but in the private insurance market, you asked about every element of your lifestyle. Um, and there's no ability for you to experiment with the risk factors. So I could name my career in six different ways.
But if I start to try and experiment on comparison sites, I get flagged as a fraud risk. So there's loads of problems there. And from your perspective, I think we need a review of Sidra, the Consumer Insurance Act, um, where there is some quite consumer friendly terms that sit in there allowing insurers to just walk away from policies where you, um, you know, gave the wrong information and they wouldn't have covered you.
And in the worst cases, that means they're unable to have a car because they can't afford to insure themselves. You know, more broadly. And related to that, we need to think. About the fairness of insurance pricing in a more data heavy world where, um, you know, insurers now use already over 400 data points to price on there's no transparency around that. Um, but what we see is, you know, more pockets of consumers where, um, you know, they are priced out of the market because they're deemed too high a risk or they're uninsurable.
Uh, and, you know, this is a social debate we need to have. We all accept the NHS as the fabric of our society. We can live whatever life style we need decide to, uh, and still, um, still. Still have the healthcare tab picked up. Um, but in the private insurance market, you asked about every element of your lifestyle. Um, and there's no ability for you to experiment with the risk factors. So I could name my career in six different ways.
But if I start to try and experiment on comparison sites, I get flagged as a fraud risk. So there's loads of problems there. And from your perspective, I think we need a review of Sidra, the Consumer Insurance Act, um, where there is some quite consumer friendly terms that sit in there allowing insurers to just walk away from policies where you, um, you know, gave the wrong information and they wouldn't have covered you.
15:57
Speaker 8
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Speaker 8
And on that point, it would be helpful if you followed up in writing. I'm sorry, I'm dishing out homework, but, um, just on the insurance generally and people becoming uninsurable because insurance, more data rich, does that take you to the point where you feel there should be some sort of basic insurance product that people can access in the market as a matter of course, just like you're able to access basic bank accounts?
15:57
Speaker 4
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Speaker 4
Yeah. I mean, in terms of the poverty premium, how are we going to sort this out if insurers know that this customer group is more expensive for them in terms of claims, that's an economic reality, right?So there has to be some sort of subsidy in there. Um, but you know, the motor insurance task force was meant to get stuck into this. Um, you know, again, because of the narrative we've talked about coming out of the Treasury and the fact that there was a revolving door in the economic secretary's office.
Uh, and I think it was the transport minister who had tabled this, who then also left her post. The final report did absolutely nothing. Um, and, you know, in terms of premium finance, the Motor Insurance Task Force says we can't look at that because the FCA is looking at it. And then the FCA said, well, we're not going to do anything.
Uh, and I think it was the transport minister who had tabled this, who then also left her post. The final report did absolutely nothing. Um, and, you know, in terms of premium finance, the Motor Insurance Task Force says we can't look at that because the FCA is looking at it. And then the FCA said, well, we're not going to do anything.
15:58
15:58
15:58
Speaker 3
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Speaker 3
Better because, for example, young people find it impossible to get affordable insurance. Um, that's a huge issue. So then if they're unable to get insurance and unable to maybe have a car to access work, particularly in rural areas where they don't have access to decent transport, then that restricts them from entering the job market. So it's wider than just the insurance aspect of it. But any young person who's trying to get insurance will probably be about ten times as much as somebody in other age groups.
So it's really a challenge in terms of it's exclusive rather than inclusive and letting people improve their lives.
So it's really a challenge in terms of it's exclusive rather than inclusive and letting people improve their lives.
15:59
15:59
15:59
15:59
16:00
16:00
Speaker 5
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Speaker 5
Just in on this section. I know you've talked about particular groups being judged because of their characteristics. I mean, with the emergence of, yes, AI, but other other technologies, wearable tech and so on, they're going to be able to get quite granular and quite sophisticated about the types of profiles that they're insuring. Now. Are you concerned about what impact hyper personalisation could have in the insurance market as well as contrast?
16:00
16:01
Speaker 4
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Speaker 4
But I think, you know, we, you know, to look at that from a positive side, um, you know, we already have telematics, you know, not very popular. Um, so, so you know, the case I'm making is not that we say to insurers, you can't use different data sets to price, but we need to be really clear about what data sets they can use and how transparent they are about them. And then, and then be honest about the areas where actually some people are just high risk.
16:01
16:02
Speaker 4
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Speaker 4
I mean, that is where we've moved from a world where insurers were fairly blind to everybody's individual risks and insured on a small number of factors to a world where they don't even understand the pricing themselves. You know, I mean, the FCA wrote a blog looking at the, um, the ethnicity premium, uh, and basically said, we don't know why it's happening. We've got no explanation. I personally don't think that's good enough.
16:02
16:02
Speaker 12
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Speaker 12
Thank you. And clearly it's a sector that's grown hugely from under 1,000,000,000 in 20 17 to 13 billion in 2024. And it's already been said it took too long for the FCA to, um, take it over, which it obviously is doing on the 15th of July. Could I just ask you how you're going to measure the outcomes of that regulation?And what should we be looking at as a committee?
16:02
Speaker 7
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Speaker 7
I mean, just to welcome those regulations again, I mean, in April 2022, we helped 100 people within that month with the buy now, pay later issue. Uh, so definitely well overdue. And we do certainly hope that, uh, the new rules will be successful in reducing the number of problems. So the number of calls, the types of calls that we're getting, and we can pass those on to the regulator as well. So there's kind of a risk that we sort of don't quite see the drop, but things are better because they're not as bad as they were.
It kind of also depends on people's financial situations. Now they are. So we think, um, definitely there's monitoring we can do, but it's not going to be super straightforward.
It kind of also depends on people's financial situations. Now they are. So we think, um, definitely there's monitoring we can do, but it's not going to be super straightforward.
16:03
16:03
Speaker 3
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Speaker 3
Uh it's going to be absolutely essential for our sector money advice Scotland support a large number of organisations working in the free money advice sector, and this has been the most um. So it's not just for luxuries, it's for essential goods as well for food for, for survival. And we have a module called base camp within our service where the free money advice sector are all discussed on a daily basis. It's, it's a daily occurrence. So I mean it's certainly something money advice Scotland would be very keen to feed back on because um we'll look at seeing if there's any difference when um you know, when July comes and we'd be happy to see if it um improves and changes the amount of enquiries that we're actually having.
16:04
Speaker 12
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Speaker 12
And just, um, just as a follow up, I think some people have attributed the increase in the buy now pay later sector as being the result of other forms of short term credit having been strongly regulated, if not stopped altogether, like payday loans and other areas. Do you see a possible um effect again, an unintended consequence of people using other forms of unregulated credit because they can no longer use buy now, pay later perhaps.
16:04
Speaker 7
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Speaker 7
Uh, absolutely. Like it takes quite a long time to whack down on a problem. There definitely is a risk that we'll see a new sector, slightly different sector emerging. And listening to consumer groups this time when we're telling them that there's a problem, but also the underlying issue here, which is why people end up being driven to these, is that we've got a huge living standards crisis. So you're never really going to tackle the problem of kind of the high cost credit market until we tackle that sort of broader affordability, which is a much bigger societal question, probably for another day.
16:05
16:05
16:05
Speaker 10
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Speaker 10
Because obviously in April, the new benefit rules came in place. But over time, I think a lot of us in this room would like to see the end of families using food banks, for example, by the end of this parliament, it won't be immediate. Surely families, I think there'll always be single adults. What monitoring is the cab doing so that we have really good data in 12 months time, say, or 24 months time about the impact on poor families?
14:21
Speaker 7
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Speaker 7
And this is a change that we, uh, hugely welcome. You're right. Um, but we carry out extensive monitoring of our data in terms of who we're seeing, like issues including, um, debt levels. And it sort of breaks down by household type as well. So we will be able to kind of see the impacts of that. Um, all of that's available on our website, but anytime anyone wants it, we're always happy to talk through our data and what we're seeing.
14:21
Speaker 10
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Speaker 10
Thank you. And perhaps just a technical question for anyone on the panel who wanted to pick it up, existing debt with buy now, pay later will remain unregulated after July. So assessing the risk of consumer confusion over which bit of the debt has Fos protection, which does not, is there going to be like training for the advisers on which bits are regulated in which way?Um or do you think that this the information is sufficiently clear. That um is anyone else on the panel want to pick that up or.
14:22
14:22
14:22
14:22
14:23
14:23
Speaker 1
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Speaker 1
Thank you very much, Miss West. I think our witnesses very much indeed for their time. That's James Daley, the managing director of fairer finance. Rocio Concha, the director of policy and advocacy and the chief economist at which, and Pardo Online, the head of policy at Citizens Advice, and Janine Rennie, also online, the chief executive of Money Advice Scotland. Thanks to our colleagues at Hansard, the transcript of this session will be available on the website uncorrected in the next couple of days.
Thank you also to our colleagues at Bow Tie and to our witnesses for attending, whether virtually or in person, on this very hot day. We've had a very good canter round. A lot of the topical issues around consumer finance, which will the committee will continue to keep a close eye on, especially with the bill going through the House of Lords. Um, but can I thank you very much indeed. Order, order!Order, order!
Thank you also to our colleagues at Bow Tie and to our witnesses for attending, whether virtually or in person, on this very hot day. We've had a very good canter round. A lot of the topical issues around consumer finance, which will the committee will continue to keep a close eye on, especially with the bill going through the House of Lords. Um, but can I thank you very much indeed. Order, order!Order, order!