Developing a strategy for access to advice and support on Social Welfare Law in England and Wales
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The Future of Money Advice

After some searching criticisms of the Money Advice Service (MAS), the Treasury is reviewing the operation of MAS.

The Low Commission has been clear the MAS/FCA funding and statutory levy system to provide for debt advice and financial education has been great policy innovation. But like others in the Advice Sector we have had some concerns about operational policy and branding issues, whether the funding priorities are the right ones and whether support is going towards the most needed services.

However in our final report, the Commission concluded that “We consider that an increase in the levy should be accompanied by a review of how MAS operates, including looking at how money is divided between financial capability and debt advice work. Such a review should be conducted in conjunction with other organisations such as Citizens Advice to avoid duplication and to ensure best use of resources.”

So the review is an opportunity to address issues three years into the establishment of MAS. And there is clearly a lot of thinking going on about how to adapt and develop the MAS model. A recent Centre for Social Justice Report Restoring the balance: Tackling problem debt for example has suggested that a wider body of creditors (ie not just the financial industry) should be contributing to the funding of money and debt, and that such funding should be built into existing and new regulatory structures. Ie regulators such as Ofcom, Ofgem and Ofwat and Government agencies need to create a new mandate on companies and government bodies to fund debt advice services that will help decrease debt and improve rates of repayment.

The CJS believe that given the impact and growth of non-credit debts, which have increased the need for free independent debt advice, it’s necessary for more creditors contribute to funding debt advice services, and point out that non-financial creditors, such as local government, magistrates’ courts, telecoms and energy companies that benefit from the provision of free independent advice to their customers, do not contribute to funding these services despite there being a clear “business case” for them to do so.

So the recommendation is that “The regulators of industries that have contributed to the rise in household debts (Ofcom, Ofgem and Ofwat) should evidence the business case for funding debt advice in their sector and require the firms they regulate to do so. The Treasury should explore how government departments, agencies and local authorities who act as creditors should fund debt advice services, and evidence the benefits of doing so in the form of increased repayments.”

Now that the Money Advice Service has now become the mainstay Commissioner of debt and money advice, including face to face advice, as well its statutory role to deliver financial information and education services, these are precisely the ideas that policy-makers need to develop. In our view the funding total for debt advice remains inadequate. In our final report we recommended that the Financial Conduct Authority should increase its levy on financial institutions from £80m to £100m pa to reflect the high incidence of debt and the demand for advice this produces. We also recommended that the FCA should use its powers under the legislation to impose a greater levy on payday loan companies to fund debt advice services, to reflect the greater consumer detriment that occurs in the high cost credit market. Ultimately, we would like MAS to explore how it could co-commission services with other public funding streams for advice provision (eg lottery etc).

We have commented on MAS advice model and operations extensively in our response to the HMT review, which you can find in the consultation response pages.