One in 10 Scots are having to survive the economic crisis without a bank account – despite government efforts to force banks to make accounts more easily available.
A report published today by Citizens Advice Scotland (CAS) shows that many Scots have been unable to open a bank account. In an age when financial transactions are increasingly electronic, this leaves them with no means of receiving benefit payments or salaries, or of accessing any form of credit and therefore of managing their day-to-day finances.
The CAS report, ‘Banking on the Basics,’ is based on evidence both from CAB clients and from a survey of members of the general public. It shows that:
- One in ten Scots do not have a bank account, although two thirds of people without an account have tried to open one.
- The problem affects at least 5% of Scottish households, which is higher than the rate in the UK as a whole (3%).
- In Scotland, 1 in 5 households in the 15% most deprived areas don’t have a bank acount.
- Young people and those living in rural areas are among those worst affected.
Publishing the report today, CAS Chief Executive Lucy McTernan said,
“For those who have a bank account it may seem a trivial thing, but not having one means that you can’t receive money, either from the benefits system or from employers. We have seen cases where unemployed people have had to turn down a job because the employer wanted to pay them by bank transfer and couldn’t do so.
“The reasons why people are refused bank accounts are often related to poor credit history. But we believe that even people who have had such problems are entitled to operate a bank account. 10 years ago the UK government tried to address this problem by calling on the major banks to make available a ‘basic bank account,’ which was an account which has no overdraft or credit facility, and therefore carries no risk for the bank but allows the client to manage their funds.
“This seemed the ideal solution, but our evidence today shows that the banks have been refusing applications for such accounts. Sadly, it seems that the major banks are letting people down again.
“We believe that everyone should have the right to a bank account, and we are calling on the mainstream banks to facilitate that. We are also urging the UK and Scottish Governments to support organisations who offer alternatives to banking services, like Credit Unions. We’re delighted to have secured the support of politicians across parties at both Holyrood and Westminster (see below) in this.
“The issue here is exclusion. Vulnerable people in Scotland are being financially dis-enfranchised. The very people who need the most help are being once again left behind.”
CAS staff are available for interview about this report, either recorded in advance or live on Wednesday. For more details please contact Tony Hutson on 0131 550 1010.
Notes to editors - click to expand/collapse
The detailed report, ‘Banking on the Basics’ is available on request, and can be accessed here.
There are three additional items pasted below:
- A list of case studies showing the problems some CAB clients are experiencing (these are anonymous, but we do also have a small number who are available to be interviewed and photographed).
- Motions in support of the report, which have been lodged this week at both the Scottish and Westminster Parliaments.
- A briefing sheet, summarising the main findings of the ‘Banking on the Basics’ report.
Case Studies (anonymous)
These are all case studies from Scottish CABs over the last few months.
- A North of Scotland CAB reports of a young client who is an undischarged bankrupt and has been denied a basic account by two local banks. She is unable to have her wages paid into a bank account and is finding it difficult to make bill payments as a result.
- A West of Scotland CAB reports of a client who became bankrupt and was advised by her bank that she would be downgraded to a basic bank account. The client was happy with this but has now been told that her account is being closed altogether and that she may not bank there any longer. The client has tried other banks and building societies but has been refused due to the undischarged bankruptcy. The Post Office account won‟t be of use as she needs her wages paid into the account.
- A North of Scotland CAB reports of a client with multiple debt. The CAB assisted the client in completing her application for bankruptcy and advised her to open a new bank account as soon as possible. The client was advised to get bank account details to complete her bankruptcy form. The client approached two banks both of whom refused her a new bank account. The first refused her based on her impending bankruptcy and the other for not having valid ID.
- A West of Scotland CAB reports of a client who is a discharged bankrupt and has issues with opening a bank account. Every application that the client has made for a basic bank account has been rejected. The client has a new job and needs an account for his wages to be paid into. He has been told by banks that they do not need to accept him as a customer.
- A West of Scotland CAB reports of a vulnerable client in employment. The client's bank was charging excessive bank charges leading her to close her account. She has taken money out of her pension to pay off her debts but was sent a non cashable cheque which she has to deposit into an account. The client has tried to open an account with three local banks but has been refused each time. The client fears that this may be because of a discharged bankruptcy.
- An East of Scotland CAB reports of a client with multiple debt issues who was made redundant in 2008. The client was advised to open a new basic bank account with a bank she does not have a debt with. The client has tried and has been declined a basic account even after regaining employment.
- An East of Scotland CAB reports of a client who has started a new job and requires a bank account for his wages to be paid into. The client is having difficulty opening a bank account and thinks that the reason for this is that he is in debt with a bank for £4,000 - £6,000. He has tried other banks and building societies but was turned down as he had a poor credit rating. He also does not have a passport, driving licence or utility bill as proof of identity. He is currently living with his father and grandparents and is on the waiting list for local authority housing.
- A West of Scotland CAB reports of a client who is having difficulty accessing a basic bank account after his current account was closed by his bank. Banks have refused him a basic bank account after a credit check and refuse to say why. The client now has to pay a hefty charge for a cheque-cashing service for his wages. The client feels that the response from banks is very unfair as a basic bank account doesn't involve credit facilities.
- An East of Scotland CAB reports of a client who is having difficulty opening a basic bank account to have his wages paid into. The client's employer has refused to pay him any other way and has declined a request to pay wages into his partner's (girlfriend) account.
- A West of Scotland CAB reports of a client whose account was closed by his bank because of debt issues. The client tried to open basic bank accounts with other banks who he did not have any history with but was turned down each time without any reason being provided. The client's employer is now paying him by cheque and the client has had to pay cheque cashing fees as a result of the situation.
These are the two motions lodged this week in the Scottish Parliament and the House of Commons, supporting the findings of our report.
- Scottish Parliament motion:
Lodged by Kenny Gibson MSP (SNP MSP for Cunninghame North). S3M-07408 Banking on the Basics — That the Parliament welcomes Citizens Advice Scotland’s (CAS) most recent research report, Banking on the Basics, outlining issues experienced by people living in Scotland in accessing basic bank accounts; notes the finding that one in 10 public survey respondents did not have a bank account although two thirds of these had tried to open one; further notes the report’s findings that a number of people living in Scotland are unable to open a bank account due to having a poor or no credit history, being unable to meet set ID requirements, owing money to a bank or due to an undischarged bankruptcy; considers that access to bank accounts is essential for receiving wages, accessing affordable credit, receiving lower utility bills and for financial inclusion; further considers that the CAS use of client evidence means that it speaks with authority on the effects of policies and practices adopted by financial service providers in Scotland, including those who provide services to people living in Cunninghame North, and would welcome the implementation of the recommendations made in the report, including the introduction of a universal right to a bank account for all.
- House of Commons motion:
Lodged by Katy Clark MP, (Labour MP for North Ayrshire & Arran), Banking on the Basics - That this House welcomes Citizens Advice Scotland’s most recent research report Banking on the Basics, outlining issues experienced by people living in Scotland in accessing basic bank accounts; notes the finding that one in ten public survey respondents did not have a bank account though two thirds of these had tried to open one; further notes the report’s findings that a number of people living in Scotland are unable to open a bank account due to having poor or no credit history, for being unable to meet set ID requirements, for owing monies to a bank, or due to an undischarged bankruptcy; acknowledges that access to bank accounts is essential for receiving wages, accessing affordable credit, receiving lower utility bills and for financial inclusion; recognises that the Scottish CAB Service’s use of client evidence means that it speaks with authority on effects of policies and practices adopted by financial service providers in Scotland and urges the UK Government to pursue recommendations made in the report and calls on the Government to introduce a universal right to a bank account for all.
Citizens Advice Scotland’s latest report, ‘Banking on the Basics’, is based on a public and CAB adviser survey on the accessibility of basic bank accounts. The report highlights the problems experienced by both CAB clients and the Scottish public in trying to open a bank account.
‘Basic Bank Accounts’ were introduced in order to decrease the number of people who were unbanked and to increase financial inclusion. They still remain to be realized as a universal product for all.
For this report we collected case evidence from CABs across Scotland, and we also conducted a poll of 400 Scots.
The experience of CAB clients
Our report found that clients are unable to access basic bank accounts for a variety of reasons, including undischarged bankruptcy, being in debt to a bank, or having a poor credit history.
- Almost a third of CAB clients reported encountering problems opening a basic bank account because of an undischarged bankruptcy. Two in five clients who were undischarged bankrupts were unable to open a bank account at all, with a majority using a family member’s bank account in order to receive wages and/or benefit payments
- Three in five CAB clients whose account was closed had a debt with their bank. Clients in financial difficulty, particularly those living in rural areas with few banking options, have found it difficult to open and retain accounts with any of their local bank branches due to past and present debts owed
- A quarter of clients with poor credit histories had problems opening a basic bank account and almost two thirds of these clients had their bank account closed because of debt
Lack of even a basic bank account leaves clients unable to access affordable credit, manage their debts, or even in some cases, pursue employment opportunities.
Key findings from our public survey of 400 Scots, conducted for this report, show that:
- One in ten do not have a bank account, although two thirds of those have tried to open one
- Almost half had been denied a bank account because of a poor credit history, a third due to lack of appropriate identity documents, and almost one in five because of current or historic debt with the bank
- The research also found that those who had become bankrupt through the Low Income Low Asset (LILA) route to bankruptcy were more likely to have a basic bank account compared to those who had been made bankrupt through other routes. Although subject to the same stringent checks by banks, these clients were more likely to have received advice to sort out their banking services prior to becoming bankrupt
- One in ten of those in employment did not have a bank account although four in five of these had tried to open one unsuccessfully
- Of those who had no credit history at all, three out of ten did not have a bank account, although half had tried to open one. Hardly any of these respondents had debts
- Many were denied basic bank accounts for reasons such as a lack of identity documents(ID), a lack of household bills paid in the applicant’s name, or because the applicant had only recently moved to Scotland and lacked a financial history here.
Citizens Advice Scotland’s proposals for change
Those who are financially vulnerable find it hard to meet the requirements set out by banks for accessing their services. The CAB service in Scotland recommends that:
- Mainstream banks adopt principles of universal no cost basic banking, allowing undischarged bankrupts and individuals in financial difficulty to access basic banking products
- The UK and Scottish governments support Credit Unions and alternative financial institutions – including the establishment of a Post Bank - in their work on increasing access to basic banking services
- On the commitment to universal banking within the 2010 UK budget, the universal right to a basic bank account needs to be established without any conditions - enabling access for all, including undischarged bankrupts.
For more details on the contents of the report, contact Alizeh Hussain, CAS Social Policy Officer. Tel. 0131 550 1014. Email Alizeh.firstname.lastname@example.org.