The Treasury Committee has published a new report on household finances. In response to the report, MPs have called for greater support to help UK households that struggle financially, to help them deal with debt and encourage saving.
The report highlighted that many households are over-indebted and lack a ‘rainy day’ savings buffer and that the FCA should move forward with regulation to limit cost of high-cost credit, including overdraft fees, urgently. The report says the FCA’s cap on payday lenders has proven to be beneficial for consumers. Earlier this year, the FCA published the outcome of it’s high-cost credit review, which includes proposals on overdraft fees, rent-to-own, home-collected credit, and catalogue credit and store cards. The FCA should move forward with these proposals urgently.
Commenting on the Report, Rt Hon. Nicky Morgan MP, Chair of the Treasury Committee, said “Many households are facing challenges that are putting pressure on the health and sustainability of their finances. Over-indebtedness, lack of rainy day savings and insufficient pension savings are some of the weaknesses in the household balance sheet identified in this inquiry. The Committee’s report makes a series of recommendations for the Government to consider that would help households ensure that their finances are as resilient as possible,”
“Whilst financial service regulators and guidance bodies have important roles to play, the Government should not pass the buck to them.”
Joanna Elson OBE, Chief Executive of the Money Advice Trust, the charity that runs National Debtline, said “The Treasury Select Committee has done a good job of putting the issue of household finances high on the agenda in Westminster, where it belongs. This report contains welcome calls to action across a range of really important issues affecting households in financial difficulty – including the need to increase the supply of free debt advice, improve debt collection practices across the public sector and expand access to affordable credit.
“The Committee is right to highlight the worrying gap between supply and demand for free debt advice – and with demand only set to rise, we are pleased to see a strong recommendation for the government and Single Financial Guidance Body to consider how this challenge can be met.
“The report’s recommendations on improving public sector debt collection practices, making the forthcoming Breathing Space scheme more effective and supporting the credit union sector are particularly welcome. Taken together with the FCA’s work on consumer credit, these actions would make a significant contribution to the fight against problem debt in the UK.”
Phil Andrew, chief executive of StepChange Debt Charity, who gave oral evidence to the Committee as part of its enquiry, said “The Committee’s report shows a clear understanding of the debt landscape, a keen awareness of where problems lie, and a robust identification of who has the power to solve them. In many cases, it is the Government who needs to take action. We agree wholeheartedly with the conclusion that the breathing space scheme should include non-credit arrears and with the Committee’s incisive comments on how the over-zealous approach to enforcing government debt, including the routine recourse to bailiffs, should be addressed. We look forward to working constructively with policymakers to help them address the problems set out so cogently in the report.”
“StepChange also supports a number of the other recommendations, including that the Government should take a more strategic approach in co-ordinating the expansion of mid-cost credit to reduce reliance on high-cost credit, that the FCA should intervene on overdraft fees “as quickly as it can” and should reconsider whether a wider cap on high-cost credit – including compulsory restrictions on unsolicited credit limit increases – should be imposed.”
Stephen Jones, Chief Executive of UK Finance, said “The finance industry recognises the importance of supporting households, whether in saving for a rainy day or helping manage their money in times of financial difficulty. “This report provides a useful insight into the state of household finances and underlines the need for the industry, government and regulators to continue to work together to ensure the best possible outcomes for consumers.”
Gillian Guy, Chief Executive of Citizens Advice, said “The spotlight is once again being shone on the financial pressures households are facing. While mounting consumer credit understandably grabs headlines, there is a hidden debt problem in this country in the form of arrears on our household bills. MPs are right to acknowledge that government agencies and local authorities are worst in class for debt collection – when they should be leading by example. Reforms in 2014 were introduced to protect people from unfair practices, with a particular focus on how bailiffs collect debt.”