Time for Fair Banking Act as cost of living crisis bites: Sam Rex-Edwards

One area where this has been particularly problematic is finance, where communities have suffered from rapid closures of local bank branches and an inability to access cash - two issues that impact most directly on vulnerable people.

While these two issues have grabbed the attention of both media and politicians, they are just the tip of an iceberg of less visible, but connected, issues with our financial system. For example, increasing financial pressures and shocks have led many to turn to very expensive credit providers, often trapping them in debt and snowballing interest. One estimate in 2022 put the number of people in England forced to use dangerous illegal lenders like loan sharks at more than a million.

While the problem of ‘payday lenders’ and loan sharks has been occasionally raised, the real driver of the problem - a lack of ethical and affordable lending provision - has rarely been discussed.

And it’s not just individuals that are affected.

Despite the desperate search for economic growth, many businesses are also unable to get the services they need to start or grow.

That has a significant knock-on impact on local economies, given small and medium-sized businesses account for most of the private sector employment in the UK.

The impact of this ‘financial exclusion’ also mirrors and exacerbates many fault lines in wider UK society, with people of colour finding it more difficult to access banking services including credit, and Black victims of fraud more than twice as likely as white customers to have refund requests denied.

Looking across these issues, the understandable temptation is to pin the blame on individual banks. But while there is more that banks could do, the reality is many have made efforts in this area but are held back by a lack of coordination and incentives from government and regulators.

To tackle this, a coalition of organisations including responsible financial institutions, charities working to tackle financial exclusion, expert organisations, and academics are calling for a ‘Fair Banking Act’. The Act would require mainstream banking institutions to report on their performance on financial exclusion, through a transparent, publicly-available framework, and create a system for clear ratings, showing which banks are doing well and which need to improve. It would mean mainstream banking institutions with poor ratings would have to take action, and would create a partnership between banks, responsible financial institutions and regulators focused on finally fixing the problem.

The simple reality that this Act reflects is that everyone deserves fair and equal access to financial advice, fair lending, and services like cash or local bank branches, regardless of their background. It’s basic fairness, and the public clearly agrees, with recent polling showing nearly seven in 10 people would support a new law like the Fair Banking Act. Now it is time for politicians to sit up, take notice, and act.

Sam Rex-Edwards is Co-Head of Campaigns, at the Finance Innovation Lab