Scottish MPs will today debate how to force Scotland’s main banks to stop turning away people who need a bank account.
The debate, brought by Sheila Gilmore, the Labour MP for Edinburgh East, takes place at 4.30pm this afternoon in Westminster Hall. It was lodged after a report by Citizens Advice Scotland (CAS) found that 1 in 10 Scots are having to survive the economic crisis without a bank account.
The CAS report, Banking on the Basics, was based on evidence both from Scottish CAB clients and from a survey of members of the general public. It found 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 the 15% most deprived areas of Scotland, 1 in 5 households don’t have a bank acount.
- Young people and those living in rural areas are among those worst affected.
Speaking ahead of today’s debate, CAS Chief Executive Lucy McTernan said,
“We raised this issue because we have received strong and consistent evidence about it from CAB advisers across Scotland. Our report showed that banks are refusing applications from huge numbers of people, and this makes life tougher than ever for them as they struggle to get through the aftermath of the recession. We are very pleased that the issue is being debated by MPs and we will be listening carefully to what they have to say.
“Most people who have a bank account probably just take it for granted. But imagine for a moment what it would be like not to have one. The main problem is that you can’t receive money, either from the benefits system or from employers. We have actually seen cases where unemployed people have had to turn down a job offer because the employer wanted to pay them by bank transfer and couldn’t do so.
“The reasons why people are refused bank accounts often relate to poor credit history. 10 years ago the UK government tried to address this by calling on the major banks to make available a ‘basic bank account,’ which would have no overdraft or credit facility, and therefore carries no risk for the bank, but would still allow the client to manage their money.
“This seemed the ideal solution, but our evidence clearly shows that the banks have been refusing applications for such accounts. Sadly, it seems that the major banks are letting people down yet 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 would hope that all of these issues would be addressed in today’s debate, and we will be listening carefully to what each of the parties has to say.
“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 - either recorded in advance or live on Wednesday. For more details please contact Tony Hutson on 0131 550 1010 or 07774 751655.*
*Please note these numbers are for the CAS Press Office and are for use only by news journalists.
For other departments at CAS the switchboard number is 0131 550 1000.
Notes to editors - click to expand/collapse
The full CAS report, ‘Banking on the Basics’ was published in November, and is on the CAS website at www.cas.org.uk. A briefing sheet is pasted below, along with some case studies.
Case Studies (all 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 clien’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.
CAS Briefing Paper
BANKING ON THE BASICS
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.email@example.com.