Banks Ignore The Vulnerable

Citizen’s Advice has launched a scathing attack on Britain’s high street banks after its research revealed almost 3 million adults in the UK still do not have a bank account.

The national advice charity said that many banks "actively discouraged" the poorest people from opening basic bank accounts while those who were able to were often hit with high charges.

And in evidence today to the Treasury Select Committee inquiry into financial exclusion, the charity told MPs that the behaviour of many banks was putting a range of government policy objectives at risk.

With all benefits and state pensions now having to be paid electronically, banks have been under pressure to offer basic accounts with facilities for standing orders and direct debits.

At present four million people pay their benefits into Post Office card accounts. But the Government has announced that from 2010 it will no longer fund this system.

Despite commitments in the Banking Code to offer basic accounts, staff at Citizens Advice said many banks are continuing to put unreasonable obstacles in the way of people opening accounts, insisting on certain forms of ID, or failing to provide any information about basic accounts.

People refused bank accounts usually have to fall back on costly cheque cashing services charging an average 10 per cent per transaction.

Citizens Advice said people who do succeed in opening a basic account can end up paying a high price for a second class service that becomes a cause of debt problems rather than a tool for helping them manage their money better.

Bank charges of up to £39 for a single failed direct debit - often triggered by late payment of benefits or tax credits - were highlighted for leaving customers with too little to live on.

The charity also criticised the fact it often takes up to ten days to clear a cheque through a basic bank account instead of the standard three to four working days, putting customers at greater risk of any direct debits failure.

Teresa Perchard, the director of policy at Citizens Advice, said: "These days a bank account is absolutely essential to function in everyday life, yet one in 12 households still don’t have one.

"Our evidence shows that the consequences and costs of this can be severe, including escalating debt and the threat of homelessness.

The charity is calling on all banks to review their basic accounts provision against a set of key principles. These include making accounts available to people in financial difficulties; providing the same standards of service as those offered to current account holders and capping charges for failed direct debits and standing orders.