Some of the UK’s biggest banks have been failing their most vulnerable customers, according to the financial regulator.
Banks have been pushing homeless people or those in financial hardship towards unsuitable online applications and away from basic bank accounts.
These accounts are free, do not include an overdraft facility, and provide essential banking for those unable to open a mainstream account.
Now, the nine UK banks and building societies which operate basic bank accounts have agreed to demands from the Financial Conduct Authority (FCA) to make access more straightforward.
Basic bank accounts have many of the same functions as a regular current account, but are designed for those who might otherwise be excluded from the banking system. More than four million people in the UK have these accounts.
They are offered by Barclays, The Co-operative Bank, HSBC, Lloyds Banking Group (including the Halifax and Bank of Scotland brands), Nationwide Building Society, NatWest (including the RBS and Ulster Bank brands), Santander, TSB and Virgin Money.
Features include:
accepting payments such as wages and benefits, and allowing account-holders to make payments through debit cards, direct debits and standing orders
free, but with no overdraft facility
available to those who have a bad credit history, are bankrupt or have an official debt recovery plan
some access for homeless people, by working with charities to confirm someone’s identity
But a mystery shopping exercise by the FCA rated a third of experiences with basic bank accounts as poor or very poor.
The exercise covered 298 interactions across branches and by telephone, and rated 28% of cases as good or very good, 38% as fair, 20% as poor and 14% as very poor.
Problems included failing to offer these accounts to people who needed them, particularly those with no fixed address.
Some pushed customers in vulnerable circumstances towards online applications to open an account unsuitable for their needs.
New promises from banks
Emad Aladhal, director of retail banking at the FCA, said: “Bank accounts are important for financial inclusion, and this is about making sure the very people who could benefit from basic bank accounts are not missing out.”
Banks have agreed to provide the right account for customers first time, make it straightforward for customers without standard ID or a fixed address to open an account, and offer alternatives to online applications to those who are vulnerable.
Peter Tyler, director of personal banking at trade body UK Finance, said: “We recognise that more can be done to ensure consistently good outcomes for everyone.”
He pointed to the Breaking the Cycle, external scheme that saw banks working with housing charity Shelter to ensure people with no fixed address had access to an account.
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