The House of Lords Financial Exclusion Committee has called for the Financial Conduct Authority’s (FCA) remit to be expanded include a statutory duty to promote financial inclusion as one of its key objectives.
The call came as part of its ‘Tackling financial exclusion: A country the works for everyone’ report.
The report acknowledges the FCA has already shown initiative and proactivity in researching and debating issues around financial exclusion. These actions have been limited by the statutory objectives set out by the government, it said.
The FCA told the committee: “There are other aspects of access and financial inclusion that come under the remit of government policy rather than market regulation. The FCA’s remit does not, for example, extend to imposing public service obligations, or compelling one group of customers to cross-subsidise another.
“Progress requires a combined effort from government, industry and consumer organisations as well as the regulator. We are able to act within our statutory remit but it is more appropriate and effective for other stakeholders to deal with the aspects of financial inclusion policy which do not overlap with our objectives.”
Up until now, part of the problem has been that financial exclusion has been seen as ‘social policy’, rather than a regulatory issue.
However the report suggested adding a financial inclusion commitment to sit within the FCA’s consumer protection objective would help resolve this issue.
There were parallels here with the high cost loan cap, which the FCA said it had only been able to impose following a new clause into the Banking Reform Bill in 2013, which required them to implement such a cap.
As such the report said: “We recommend that the government should expand the remit of the FCA to include a statutory duty to promote financial inclusion as one of its key objectives. Government leadership of the financial inclusion agenda must be supported by proactive regulation. At present, the work of the FCA in this field is limited by the objectives defined in its statutory remit.
An additional recommendation was that the Financial Services and Markets Act 2000 should be amended, in order to introduce a requirement for the FCA to make rules setting out a reasonable duty of care for financial services providers to exercise towards their customers. Such a duty would promote responsible behaviour on the part of businesses and support sound financial decision-making by customers.