Treasury Committee suggests legal duty of care needed for finance firms to act in customers' best interests

Cash.
Cash.

A legal duty of care may be needed to compel financial services firms to always act in customers’ best interests, a powerful committee of MPs has suggested.

In a wide-ranging report into people’s access to financial services, the Treasury Committee said banks should not be able to ignore the issue of financial inclusion.

For most people, having access to financial services is an important part of their everyday life.

But some vulnerable consumers, perhaps because they are older, have a disability, are less well off or lack digital skills, find themselves effectively excluded, the committee found.

It said bank branches and free-to-use ATMs should be preserved.

And when banks wave people towards the Post Office when their branches close, this should not be seen as a replacement.

In cases where the last bank in town is about to shut, banks should be required to cough up money for “banking hubs” in local Post Offices with adequately trained staff, the committee said.

More use could also be made of voluntary “spending blocks”, for example when people have a gambling problem and want to stop themselves using their money on this, the committee said.

And firms should also be required to publish more about the size of their “loyalty penalties” - the extra amounts that a customer often pays for services by sticking with their existing provider and not shopping around.

Citizens Advice has calculated this can add up to nearly £1,000 extra per year.

Treasury Committee chairwoman Nicky Morgan said: “The financial inclusion of vulnerable consumers - and we can all be vulnerable at some point in our lives - should be of the utmost priority for financial services providers, the Government, and financial regulators.

“It can no longer be an option for banks to ignore financial inclusion. A patchwork of improvements and adjustments have been targeted at some groups of consumers, but the basic level of access is still not universal.”

It comes after The Yorkshire Post earlier this year published a week-long series of articles on issues affected the high street.

Of the 700 bank branch closures over the course of 12 months, only 131 were in cities, while 353 - more than half the total - were in towns of varying sizes, it was reported.

Many banks are ushering customers towards the Post Office, but the Post in January reported how 43 of its branches in Yorkshire and the Humber closed between March 2013 and 2018 - and 33 of those were in rural areas.