Source · Select Committees · Public Accounts Committee
Recommendation 5
5
The growth in salary advance schemes across the NHS raises questions about their status as...
Conclusion
The growth in salary advance schemes across the NHS raises questions about their status as unregulated consumer lending. In February 2021, the Financial Conduct Authority (FCA) published the Woolard Review which noted that the salary advance schemes market was predominantly found in the hospitality, retail and healthcare markets and was still in a stage of relative infancy. It stated that salary advances could result in some users experiencing a shortfall in income at the end 8 The pharmacy early payment and salary advance schemes in the NHS of the month, leading to the risk of persistent use of the product, escalating charges or driving consumers to use mainstream or potentially high-cost credit to ‘bridge the gap’. The NAO investigation, which surveyed eight NHS trusts, highlighted that active users of the salary advance scheme ranged from 1.3% to 10% of employees by NHS trust. Following the collapse of Greensill Capital, some trusts have moved to a paid-for scheme provider which charges both the employer and the employee. We understand from NHS Shared Business Services (NHS SBS) that 60 of 100 NHS trusts serviced by NHS SBS were interested in salary advance schemes. It is worth noting that other NHS trusts have contracted directly with scheme providers. The increasing appetite for salary advance schemes clearly brings with it greater risks to customers, but as yet these schemes remain unregulated. Recommendation: The Department along with HM Treasury, should work with the FCA to consider, as a matter of urgency, what measures and regulation can be applied to salary advance schemes to enforce the adoption of a code of good practice by scheme providers and employers. The pharmacy early payment and salary advance schemes in the NHS 9 1 Unsubstantiated business cases
Government Response
Acknowledged
HM Government
Acknowledged
5.1 The government disagrees with the Committee’s recommendation 5.2 Unsecured consumer credit is regulated under a legislative framework. Where consumer detriment is identified, the government is able to extend the perimeter of that framework to ensure that there is appropriate consumer protection. For example, the government is currently looking to extend regulation to cover interest-free credit agreements under 12 months and repayable in 12 or fewer payments. However, salary advance schemes generally operate entirely outside of credit regulation as the early payment of accrued wages does not usually involve the provision of credit. The government has also not seen substantive evidence of consumer detriment arising from the use of salary advance schemes. It has instead observed that these schemes can provide a useful tool to help people manage their finances, for example meeting unexpected costs or helping to manage the payment of larger one-off purchases. The government’s assessment is therefore that these schemes do not merit regulation, which would impose costs on the providers and would likely be reflected in the costs to consumers. 5.3 The government understands that firms offering salary advance schemes are developing an industry code of practice. The government welcomes this development and, alongside the FCA, is engaging with the industry as the code develops and will consider if any further interventions are needed in the event of any signs of consumer detriment.