Agenda item

Fair Access to Credit Task Group

Minutes:

Background:

This report provided details of the outcome of the Overview and Scrutiny Task Group in-depth review of fair access to credit, which had originated from a motion considered at Full Council on 12 January 2012 on the issue of affordable credit and the decision to refer this issue to a cross party Overview and Scrutiny Task Group.

The Task Group met with representatives from a number of organisations. This included the Medway Citizens Advice Bureau, Credit Unions, trade associations, a loan provider, the Youth Parliament and officers from various sections of the Council. This was supported by additional written submissions from a number of organisations/individuals working within the remit of the review and further desktop research, which led to the Task Group developing 29 recommendations.

Following the conclusion of the review, the Task Group’s report was submitted to both the Business Support and Regeneration, Community and Culture Overview and Scrutiny Committees, details of which were set out in paragraphs 5 and 6 of the report.

It was noted that the main findings/recommendations of the review responded to the Task Group’s consideration of:

The role of the Council in supporting Medway residents affected by unaffordable credit. This included work to enable credit unions, promote financial literacy and support the establishment of a Social Impact Board;

Strengthening the rules governing the issue of lending licences and, recognising that an effective strategy in combating illegal lending was an alternative supply, addressing the lack of affordable credit. This included focus on giving local authorities greater control over the planning process and enabling affordable alternatives such as credit unions and;

How the Council could promote financial literacy and affordable lending and debt counselling recommendations focused on promoting the integration of financial education into the curriculum, financial literacy for all and promoting the timely access to appropriate and quality advice.

A Diversity Impact Assessment (DIA) screening form had been completed and was attached at Appendix 1 to the review document. The assessment focused primarily on the recommendations for Council services, as the Government departments would have their own assessment frameworks for anything that they decided to action. The screening form showed that it was not necessary to undertake a full assessment on the review document.

Decision number:	Decision:
118/2012	The Cabinet welcomed the current scrutiny of the credit market at a national level, as evidenced by the Office of Fair Trading review of payday lending.
119/2012	The Cabinet agreed that the council should respond to consultations on the consumer credit market where appropriate.
120/2012	The Cabinet noted that Medway Citizens Advice Bureau, with support from Wonga, was undertaking a review of lending products and the level and nature of consumer indebtedness amongst Medway residents and would support the findings of this being reported to the proposed Social Impact Board (see decision 121/2012).
121/2012	The Cabinet supported the establishment of a multi-agency Social Impact Board in Medway looking at issues of debt, worklessness and housing. The objective being to continue and enhance partnership working with public, private and voluntary sector providers, with an emphasis upon a co-ordinated approach that actively assesses the needs of Medway residents. That the Board be encouraged, as and when appropriate, to work with the lending trade associations and the lenders themselves.
122/2012	The Cabinet agreed that the Director of Regeneration, Community and Culture writes to local organisations including voluntary, community and church groups in Medway, emphasising the need to notify Medway Council’s Trading Standards team and Financial Ombudsman Service of instances of firms acting inappropriately or illegally to ensure they can be investigated in an appropriate and timely fashion.
123/2012	The Cabinet supported the transfer of the regulation of consumer credit to the Financial Conduct Authority (FCA) and noted that the model for FCA regulation would be designed with input from the Financial Services Authority, Office of Fair Trading, and industry and consumer representatives and the transfer will then be subject to impact assessment and approval by both Houses of Parliament.
124/2012	The Cabinet noted and commended the announcement by the Government on 19 July 2012 that the Office of Fair Trading is to be given power to suspend a consumer credit licence with immediate effect where there is an urgent need to protect the interest of consumers.
125/2012	The Cabinet agreed that the Director of Regeneration, Community and Culture recommend to the Minister for Communities and Local Government and Medway’s Members of Parliament that the Town and Country Planning (Use Classes) Order 1987 be amended, so that any holder of a Consumer Credit Licence which is not also regulated by the Financial Services Authority for the purpose of taking deposits, is removed from the A2 Use Class as defined in TCPUC 1987 and placed in a new category.
126/2012	The Cabinet welcomed the appointment of Bristol University’s Personal Finance Research Centre to carry out research into the impact on consumers and business of a variable cap on the total cost of credit that can be charged in the short to medium term high cost credit market. The research was due to report in summer 2012 and it was agreed that the Council review and respond to the Government response to this research.
127/2012	The Cabinet agreed that the Director of Regeneration, Community and Culture recommend to the Department for Business, Innovation and Skills, whilst noting the current Office of Fair Trading review into the payday lending sector, that the Government consider introducing: · Limits on the ability of consumers to roll over loans. · Further controls over marketing and curtailing the targeting of specific groups. · In discussion with credit agencies and trade associations, new means to improve credit referencing, so all lenders provide real time information to credit agencies about the payment performance of customers, which in turn would assist those with good payment records to use mainstream lenders in the future and restrict the possibility of multiple loans. · In discussion with trade associations the introduction of a compulsory total charge for credit per £100 or total cost of capital, in addition to the use of APR, to assist consumers in assessing whether the proposed agreement is suitable for their needs and financial situation, noting that it was being introduced on a voluntary basis.
128/2012	The Cabinet agreed that the Director of Regeneration, Community and Culture write to the main banks operating in Medway encouraging them to promote easy access to Basic Bank Accounts, as a means of encouraging the remaining unbanked into the mainstream, and highlighting the Task Group’s concerns about high daily penalties for unauthorised overdrafts and that the banks should be providing affordable alternatives for customers needing to take out short term loans, with greater transparency of the fee structure and fairer charges.
129/2012	The Cabinet noted that Credit Unions as financial institutions provide a sound and reliable source of affordable credit and welcomed the contribution made by Kent Savers Credit Union Ltd and Medway Credit Union Ltd for their part in providing a service to the Medway community.
130/2012	The Cabinet agreed that the Social Regeneration Manager work with the Medway Credit Union Ltd to seek a suitable High Street location within the Medway area.
131/2012	The Cabinet agreed that the Director of Regeneration, Community and Culture invite Kent Savers Credit Union Ltd and Medway Credit Union Ltd to work with officers from the Regeneration, Community and Culture Directorate to develop an action plan exploring how assistance can be provided or guidance given with business development and training to enable the credit unions to seek support from local organisations, institutions and businesses to both raise their profile, to attract new members (especially in the areas outside of the main town locations) and generate volunteers with a financial background.
132/2012	The Cabinet agreed that the Assistant Director Communications, Performance and Partnerships invite Kent Savers Credit Union Ltd and Medway Credit Union Ltd to work with officers within the Business Support department to publicise the contribution of the Credit Unions through the council’s communication channels, including Medway Matters, and the Council’s website. This is to explain what Credit Unions are, the benefits and risks of joining a Credit Union and how people could join.
133/2012	The Cabinet agreed that a copy of the Fair Access to Credit report be submitted to Medway’s Health and Wellbeing Board for consideration, in doing so the Cabinet recognised the concern and impact of debt on Medway residents’ health and wellbeing, together with the need for co-ordinated advice and support services.
134/2012	The Cabinet agreed that the Assistant Director Communications, Performance and Partnerships should ensure via all communication channels that there is a consistent message based upon early contact and intervention and support for good quality, independent debt and money advice. This should provide clear advice on the types of debt and the importance of addressing priority debts first. Consumers should be made aware of the difference between seeking free advice and turning to commercial debt management companies and signposted to organisations such as the local Citizens Advice Bureau, Consumer Credit Counselling Service, the Money Advice Service, the Money Advice Trust and National Debtline, which provide free financial health checks and advice and information for consumers before and after they take out credit.
135/2012	The Cabinet agreed that the Assistant Director Communications, Performance and Partnerships includes within The Headlines, the council’s internal electronic newsletter, key information and contacts for staff to support residents in relation to the provision of free debt advice from organisations such as the Citizens Advice Bureau, Consumer Credit Counselling Service, the Money Advice Trust and National Debtline.
136/2012	The Cabinet welcomed the free debt advice provided by organisations such as Medway Citizens Advice Bureau, the Consumer Credit Counselling Service and Money Advice Trust which provide a range of advice access points.
137/2012	The Cabinet agreed that the work and guidance issued by the Office of Fair Trading concerning debt management businesses be welcomed but that the Director of Regeneration, Community and Culture recommend to the Office of Fair Trading that further consideration be given to address continued concerns regarding fee-charging “debt management” businesses.
138/2012	The Cabinet agreed that the Director of Regeneration, Community and Culture request that the Department for Business, Innovation and Skills introduce regulation, including transparent costings of service, in relation to statutory debt management plans in order to standardise and raise the quality of service provided by debt management companies.
139/2012	The Cabinet agreed that the Social Regeneration Manager seeks to introduce a session about debt issues into the new Project CYC that will run informal education vocational development at outreach centres.
140/2012	The Cabinet agreed that the Director of Children and Adults, recognising the importance of all young people and children receiving education on personal finance and how to avoid unnecessary debt and the dangers of falling into a debt spiral, recommend to the Secretary of State for Education as part of the review of the National Curriculum that the financial education elements of PSHE should be made compulsory in primary and secondary education.
141/2012	The Cabinet agreed that the Director of Children and Adults write to the senior leaders of all primary and secondary schools/academies (including special schools) in Medway highlighting the advantages of including financial literacy as part of their curriculum and identifying the importance of appointing a school champion to ensure the achievement of outcomes.
142/2012	The Cabinet agreed that the Director of Children and Adults consider, in consultation with Medway’s Trading Standards team, examples of good practice to explore how the Council can promote and assist in the development of financial literacy and mentoring in Medway’s Sure Start Children's Centres, pre-schools, schools and Further/Higher Education institutions.
143/2012	The Cabinet agreed that the Chief Finance Officer, in consultation with the Social Regeneration Manager, bring forward proposals for a programme of sessions, one package per ward, financed from the housing benefit reforms transitional funding or such other funding which may be identified by the Chief Finance Officer, to provide targeted support in 2012/13 to help meet the housing needs of claimants affected by Housing Benefit reforms and also signposting wider money advice and support.
144/2012	The Cabinet agreed that the Chief Executive bring forward proposals to Cabinet, via Overview and Scrutiny, on a new Medway framework for the Social Fund that gives consideration to the following issues raised by the Task Group: the need to resource intensive and urgent face-to-face contact facilities, in particular for crisis loans; the development of partnership arrangements with retailers for the provision of goods rather than cash; · providing assistance to residents returning to work whilst awaiting their first payday.
145/2012	The Cabinet agreed that the Chief Finance Officer develop publicity highlighting the changes being introduced in relation to the new frameworks for Council Tax Support and the Social Fund, together with details of the Local Housing Allowance and the availability of short-term discretionary housing payments that is accessible to all communities.
146/2012	The Cabinet agreed that the Director of Regeneration, Community and Culture, with partners where appropriate, work to ensure via all communication channels that the key message is always accessing credit via a licensed lender and advising residents about lending codes and standards, for when they are considering credit.

Reasons:

The decisions bring forward a comprehensive package in the interest of Medway’s residents, setting a foundation that can be developed locally or submitted to Government as part of the national dialogue on these important issues.

Supporting documents:

Fair Access to Credit Task Group, item 6. PDF 783 KB