Funding for Money Advice Service should depend on outcomes, say lenders
Published: 22 January 2014 | Author: Bernard Clarke
Proposals for funding the Money Advice Service (MAS) in the coming financial year are now fairer and more clearly evidence-based than in previous years, the CML believes.
Our response to the Financial Conduct Authority on plans for funding the service welcomes efforts to work with the industry in developing proposals for levying fees for the money and debt advice services provided by the MAS. We would like to see this approach built upon and developed in the coming years.
We have long favoured a funding model for the service that reflects the outcomes it delivers. For the coming year, the MAS is proposing an equal, three-way split in funding between a set levy, and elements reflecting consumer use of its services and the outcomes that the MAS delivers. In our view, this is a reasonable starting point for 2014/15, but over time we believe that outcomes should play a bigger part in determining the overall levy, to give firms greater confidence that the MAS is delivering tangible results.
Our response makes four main observations about proposals to link levies charged to firms to how much use is made of advice services or other consumer tools delivered through particular channels:
- The consultation paper setting out the proposed charges does not explain how much it costs to provide help through a particular channel. Where a service has only incurred upfront costs and these have already been recovered, it seems unreasonable that firms should continue to be levied for its use by consumers.
- It is not clear if the MAS has sought to find out what kind of consumer is making use of the services provided. We would like greater certainty, for example, on the proportion of home-owning consumers using services.
- We still have reservations that the MAS is providing services and tools for consumers that either deliver no demonstrable added value or are available elsewhere. We are not convinced, for example, that the lending industry should be forced to fund a mortgage calculator when there is a plethora of similar tools on other websites.
- Levying fees on the basis of use of the service could have the perverse effect of deterring firms from directing customers to the MAS. The mortgage calculator, for example, is freely available elsewhere but, in effect, generates a "click through" levy on the industry when used on the MAS website.
Taking everything into account, we would like to see the weighting given to the "consumer use" or "output" component of the levy reduced over time, with the MAS placing a greater emphasis on tangible outcomes.
Our response to the proposals for funding the MAS reinforces our belief that independent money and debt advice plays a crucial role in helping firms provide assistance for customers. We therefore look forward to working constructively with the MAS in the future as it looks to meet it statutory objectives and deliver added value to the sector.