Consultation response

Transcription

1 Consultation response EC Consultation on bank accounts Age UK is on the EU Register of Interest Representatives: ID June 2012 Ref: All rights reserved. Third parties may only reproduce this paper or parts of it for academic, educational or research purposes or where the prior consent of Age UK has been obtained for influencing or developing policy and practice. Lucy Malenczuk, Financial Services Policy Adviser,: Nicola Robinson, European Political Adviser: Age UK Tavis House, 1-6 Tavistock Square London, WC1H 9NA T E lucy.malenczuk@ageuk.org.uk Age UK is a charitable company limited by guarantee and registered in England (registered charity number and registered company number ). The registered address is Pentonville Road, London N1 9UZ. 1

2 About Age UK Age UK is a charity and a social enterprise driven by the needs and aspirations of people in later life. Our vision is a world in which older people flourish. Our mission is to improve the lives of older people, wherever they live. We are a registered charity in the United Kingdom, formed in April 2010 as the new force combining Help the Aged and Age Concern. We have almost 120 years of combined history to draw on, bringing together talents, services and solutions to enrich the lives of people in later life. Age UK provides information and advice, runs public and parliamentary campaigns, provides nationwide training reaching over 10,000 learners annually, and funds research exclusively focused on later life. We support and assist a network of 170 local Age UKs throughout England; the Age UK family also includes Age Scotland, Age Cymru and Age NI. We are also a social enterprise. Age UK runs 470 charity shops throughout the UK, and through our trading arms, the Age UK group addresses market failures by developing and marketing age-friendly, accessible products and services, including in the financial sector. Age UK aims to represent the interests of people in later life, in the UK, the EU and the wider world. At European level, Age UK is a founding member of AGE Platform Europe, the Brussels-based network of around 150 civil society organizations of and for people aged 50+, which aims to voice and promote the interests of the 150 million senior citizens in the European Union. Age UK provides coordination and secretariat for all of AGE Platform Europe s UK members. Our current EU influencing work principally concerns equal treatment, active ageing, employment, financial services, health, digital inclusion and consumer policy. We have many years of experience working with European partners, including EU institutions and stakeholders in the UK and other Member States. For more information please see: Age UK website: Age UK s profile on the EU transparency register: Age Platform Europe website: 2

3 Background to this consultation This consultation follows two earlier consultations. In 2010 the European Commission considered a potential initiative to ensure access to payment accounts in the EU. An earlier consultation in 2009 revealed broad support for EU action to promote access to basic bank accounts. The current consultation focuses on three areas: (i) transparency and comparability of bank accounts; (ii) Switching between payments account providers; and (iii) Access to a basic payment account. The object of the consultation document is to assess the need for action at EU level and, if it is considered appropriate, what measures could be taken in relation to one or all of the three issues. Key points and recommendations Payment services are delivered by multiple providers, including non-banks. The Commission should consider transparency and comparability across product types with similar functions, irrespective of the type of institution behind the product. There are a number of barriers to opening bank accounts caused by the failure of banks to make reasonable adjustments for customers with disabilities. There are a number of regulatory and non-regulatory initiatives in this area, however if improvements are not seen within a reasonable time frame the Commission should revisit its 2010 proposals on access to basic bank accounts. 1. Introduction We have broadly supported many of the proposals in the Commission s past consultations on access to bank accounts and payments and are pleased to see the Commission continues to take an interest in accessibility of banking and payments services. We note that this is a period where there is considerable talk of innovation in payments and banking services, however most developments are at an early stage and the payments landscape could develop in a number of different directions. It is also a period of far-reaching change in UK regulation, with a number of other relevant non-regulatory initiatives e.g. development of sustainable credit unions, HM Treasury s simple financial products initiative. 3

4 2. Responses Q1-6: Transparency and comparability of fees for current accounts We have not undertaken work specifically on this issue, but have observed a number of trends which may be relevant to the Commission s work. We note that in order to find a service which is best for them, consumers may need to compare not only a traditional current account, but also: - Packaged bank accounts - Basic bank accounts - Internet v branch based accounts - Pre-paid cards - Mobile wallets - Other payment services e.g. Paypoint/PayPal Although in the UK banking is typically free if in credit there has been a dramatic rise in the numbers of paid for premium accounts usually called packaged bank accounts. Earlier this year the Financial Services Authority held an investigation into packaged accounts as consumer research has shown that consumers often do not use all the benefits available to them and may end up with products that are not good value. i Particular issues for older consumers are accounts that include insurances with blanket age limits that exclude older consumers. Transparency of charges is important, but they must be easy to understand as well as transparent. We see some pre-paid cards seeking to compete with basic payment accounts, these often have very complex charging structures. Older people may need adjustments to mainstream services e.g. they are more likely than younger people to use cheques, they may not be able to use internet banking due to digital exclusion or ATM machines due to dexterity or visual impairments. We are concerned not just about transparency of charges, but whether older people actually have to pay more for the services they receive because of impairments or other life circumstances. The Commission should consider whether it is right that extra charges should apply to services which could be viewed as reasonable adjustments to compensate for a disability. Q7-13: Bank account switching Whilst we support efforts to make bank account switching easier and more effective, we caution against over-reliance on improving the switching mechanism to improve competition. Firstly, research has found that 75% of consumers have never even considered switching their current account provider. ii Of the 17% who have thought about switching, but have not done so, this is often due to concerns about the switching process, but also because of fears of a negative impact on credit scores. 4

5 Therefore we conclude that although the switching process is an important part of the picture, there are other, fundamental issues to be tackled before the current account market will be competitive. We also note that switching does not always help consumers. This can happen in two ways. Firstly, where consumers switch, but not necessarily to a product which gives them a better deal. In 2009 Ofgem, the UK energy regulator found that 43% of switches did not lead to price savings in the gas market. iii Secondly, competition for new customers can mean that loyal customers are effectively penalised to pay for bonuses for switchers. For example in the UK savings market we see that savings accounts now often include relatively short term bonus rates which actually make it more difficult for consumers to operate effectively in the market. Further, we note that particular groups of consumers are less likely to switch than others. Although data is not always available on switching by age, it has been found that older consumers are less likely to switch in the telecoms market. Older consumers may also face barriers to accessing information and services needed to make a good switching decision, as these are often online. Older consumers themselves report that switching is difficult. iv Q14: Do you dispose of information on consumers encountering difficulties in access to a basic bank account? What types of obstacles are signalled by the consumers preventing them from having access to a basic bank account? Research conducted towards the end of the UK s Financial Inclusion Taskforce initiative found that 14% of the newly banked had encountered problems on opening an account. However this does not tell us how many people tried to open a basic bank account and failed. v. We have received anecdotal evidence from local Age UKs providing services in the community that older people may approach an institution requesting a basic bank account and be sold a different type of current account. It is difficult to signpost clients towards basic bank accounts as each institution will refer to the basic account by a different name. Q15: Are you aware of any measures taken by banks or other institutions in the Member State where you have your residence to facilitate access to a basic payment account? Have these initiatives been successfully enforced? Basic Bank Accounts are provided by voluntary agreement of UK banks. The proportion of basic accounts held by different banks varies significantly and some banks have stated that this means the current system is unsustainable. The impact and effectiveness of basic bank accounts was tracked by the Financial Inclusion Taskforce, an independent taskforce that was supported by the Treasury. The taskforce has now closed and consequently there is less publicly available, detailed tracking of basic bank account impact. Another relevant initiative in the UK is work currently underway to develop the credit union sector. A recent feasibility study commissioned by the Department of Work and Pensions suggested that we should not expect any more from the major banks in terms of provision of financial services to those currently excluded, but instead should look to alternative providers, such as credit unions. vi 5

6 Q17: If consumers still have difficulties in opening a bank account, what are the reasons for that? We see barriers to banking beyond just access to basic accounts. Common issues include: (i) not being able to prove identification because the bank policy uses a very small selection of acceptable documents and older people (older women in particular) are less likely to have acceptable ID ; (ii) lack of adjustments made for housebound consumers or consumers with other disabilities; (iii) increasing use of technology which excludes the digitally excluded; (iv) the contracting branch network which makes it harder for consumers to access banking services (for example, 24% of people 65+ say it is difficult to access their nearest bank) vii. In the UK the branch network has contracted 44% since 1990 and 16% in the ten years from viii These barriers do not only affect the ability of older people to open a bank account, but also their ability to operate one effectively once it is open. Almost one fifth of people aged over 65 use someone else to access their day to day spending money ix. We also note that the basic bank account may not be sufficiently accessible for many older people, for example it will not usually include a cheque book and may have limited counter and ATM access. Q18: If more needs to be done what additional measures should be envisaged? Should the problem be tackled at national or EU level? We welcomed many of the proposals in the Commissions 2010 consultation on access to payment accounts in the EU. The UK Parliament is currently debating a new Financial Services Bill. Age UK is calling for the Bill to give the new regulator an objective which requires it to evaluate how well the financial services markets provide access to appropriate and affordable products for different groups of consumers. We think that regulatory and government intervention will be needed to create a market which works effectively for consumers. i CP11/20 Packaged Bank Accounts, FSA, 2011 ii Stick or Twist, Consumer Focus, 2010 iii Energy Supply Probe, Ofgem, 2009 iv The Golden Economy, ILC for Age UK, 2010 v Realising Banking Inclusion: The achievements and challenges, Policis, 2010 vi DWP Credit Union Expansion Project Steering Committee Feasibility Study Report, 2012 vii Agenda for Later Life, Age UK, 2012 viii Branch Network Reduction: 2011 Report, Campaign for Community Banking Services, 2011 ix The Way We Pay: payment systems and financial inclusion, Age UK,