CSFI

CSFI
Introduction
There is a problem – one that successive British governments have begun to tackle,
but that persists despite their best efforts. The UK is a world leader in financial
services, yet many of its citizens – and many who have moved here in more recent
years – are excluded from, or are unable to engage productively with, the financial
services essential to lead a full life.
There is a
problem...
In the first decade of this millennium, a good deal of progress was made: the number
of people without bank accounts halved and there were a number of innovations to
increase financial inclusion. These included prepaid debit cards, ATMs that were
equipped to dispense small (£5) notes and banks that agreed to refer customers
with poor credit records to credit unions and community development financial
institutions (CDFIs, now called responsible finance providers). Yet serious problems
remain:
• more than a million adults in the UK still do not have a bank account;
• 50% of households in the bottom half of the income distribution do not have
home contents insurance;
• about 2.5 million people use expensive and largely unregulated home credit
(doorstep loans);
• at its peak in 2012, an estimated two million people took out short-term, smallvalue
payday loans; and
• more than 400,000 households use the extremely expensive “rent-to-own” sector
to purchase essential household goods.
Many people – politicians, church leaders, academics – have spoken out against the
ills of financial exclusion, and there is no shortage of ideas as to how to arrest it.
Reflecting this, a reconstituted Financial Inclusion Commission (see Box 1), building
on the work of the Financial Inclusion Taskforce (2002-2011), reported in the spring
of 2015 and made 22 policy recommendations covering banking, payments, credit
and insurance. Before that, in July 2013, the Archbishop of Canterbury (who is
himself a former member of the Parliamentary Commission on Banking Standards)
added his voice to the many opponents of the payday lending industry. His initiative
led directly to tighter regulation, including a price cap on this segment of the shortterm
credit market. The House of Lords has established a Select Committee on
Financial Exclusion, and think-tanks, universities, consumer groups, government
departments, specially convened taskforces in Scotland and Wales (as well as in
England), along with parts of the financial services industry, have all played an active
role in the debate and in making recommendations for reform.
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