104. Access to basic bank accounts is not universal and in some instances
appears to be far from the shared goal envisioned by the UK government. The purpose of the shared goal between the UK government and financial industry was to decrease the number of unbanked individuals/households in the UK. The numbers may have decreased but being unbanked and banked remains transitional – with people moving out of the mainstream financial banking industry as others move in.
105. It is also of concern that those who meet all the legal requirements set by banks and the government to open an account may still have problems opening an account due to their financial history or lack thereof. In some instances people feel that this is due to the unprofitability of the basic banking product and the lack of encouragement to market such a product.
106. The legal requirements and regulations are of concern as well – particularly as vulnerable clients are less likely to have the required ID or acceptable credit history. These requirements unduly affect undischarged bankrupts, those in debt, homeless people, and those without a credit history because they don‟t pay certain bills56
.
107. This is not to say that everyone has a bad experience with opening a bank account. It is unfortunate however that a number of people do have problems in accessing accounts when they should be allowed to access basic services where they cannot be a credit risk to a bank.
108. There are alternatives to bank accounts available outside of the mainstream financial industry, through credit unions, charities and Post Offices – these still require to be developed for the purpose of universal access.
109. Citizens Advice Scotland have a number of recommendations to increase financial inclusion and universal access to basic banking services:
Banks should have a legal requirement to offer a basic bank account where an application for a current account has been rejected.
Banks should give people who have had their application rejected
information on the alternatives available to them, including information on credit union current accounts.
A number of high street banks have a strict corporate policy on undischarged bankrupts – some saying that if a client is found to be bankrupt their account will be closed, while others freeze the accounts with account holders unable to access their funds. The AIB on its website however advise that the closure of any account for undischarged
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http://www.moneysavingexpert.com/loans/credit-rating-credit-score: phone bills and sometime
bankrupts is up to the discretion of the banks. Banks should only consider closing an account if the person with the undischarged bankruptcy has a debt with the bank.
People who have a poor credit history should be allowed to access basic banking services at any bank. An account with credit facilities should be provided on the bank‟s discretion and information on the potential costs of going into overdraft or defaulting on payments should be explained clearly, and prior to the account being upgraded.
People with no credit history should be allowed to open a basic bank account, and ID requirements for such accounts need to be revisited to ensure that people who do not have any interaction with government departments, those who do not pay bills and/or those who live with a family member are not discriminated against.
Mainstream banks should ensure that no cost basic banking is marketed to people who are vulnerable regardless of their financial situation and that a universal access is established allowing undischarged bankrupts and individuals experiencing financial difficulties to be able to open and retain basing banking products and services.
The UK and Scottish Governments need to support the alternatives are available to people seeking to access mainstream banking services. credit unions, CDFIs, Charities and the Post Office can and in some cases do provide essential financial services to vulnerable people. The UK Government needs to implement a universal right to a basic bank account for all. Such a right should not be accompanied by conditions that continue to restrict access to basic bank accounts for undischarged bankrupts.
Appendix 1
Questions asked of six mainstream banks in Scotland (five responded):
1) Does the bank provide basic bank accounts to individuals with poor credit
(including from debts)?
2) What is the bank‟s policy on accounts where a current account holder has
become bankrupt?
3) What Identification does the bank require from individuals applying for a bank
account?
4) Is the ID requirement any different for basic bank account applications? If yes,
please advise on what is required.
5) Can an individual who doesn‟t possess the required ID open a basic bank
account with the bank provided that a letter from a government agency is provided as proof of ID?
6) Would the bank be able to provide statistics on the number of active basic
bank accounts this past year? Will it also be able to provide information on the number of new basic bank accounts opened this past year?
For the CAS Public Survey: see page 46
Please tell us more about your experience in trying to open a bank account with different banks, building societies, credit unions or other financial institution (You may identify the financial institution that you had the experience with)?
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