A report launched this week by Citizens Advice highlights concerns that people going through bankruptcy are too often being banned from opening even a basic, no credit, bank account. Despite there being no legal reason why undischarged bankrupts should not be able to access one, only two out of the seventeen banks that provide basic bank accounts offer them to people who have recently been made bankrupt.
The report, Called to Account, which includes evidence from Northern Ireland highlights the impact that this financial exclusion has on bankrupts. Citizens Advice is calling on banks to offer these accounts to people going through bankruptcy.
Evidence from bureaux across England, Wales and Northern Ireland, shows that being denied a basic bank account is demoralising, impractical and makes it extremely difficult for people going through bankruptcy to take control of their finances and make a fresh start.
Between 2000 and 2009 the numbers of people applying for bankruptcy in Northern Ireland rose by 243% from 350 to 1,200 (Insolvency Service). Last year between April 2009 and March 2010 CAB in Northern Ireland dealt with over 3,129 enquiries about bankruptcy, an increase of 78% on the previous year.
CAB client example
Andrew* lives in a rural location in Northern Ireland and is employed full-time, suffers from type 2 diabetes and lives alone. Andrew became bankrupt in November 2009 and needed a bank account to have his wages paid into. He previously had a bank account but this had been closed and included in the bankruptcy as the account was overdrawn.
Andrew went to one of the main local banks and explained his position and that he needed to open an account. The bank originally agreed and opened the account for him advising that his bankruptcy would not be a problem. However, when he was declared bankrupt the bank closed the account and returned his wages cheque to his employer so Andrew could not access any of the money he had been paid.
Andrew then tried to open accounts with two other banks. At a local level bank staff were very courteous and happy to open the account for him but when they checked with their respective head office they were told that the account had been refused.
Andrew never received a reason why he could not open an account and said “the local manager actually apologised to me, he was really embarrassed and did not understand. It made me feel like I had done something wrong, that there was something held on me somewhere that was saying don’t give me an account. My employer could not issue me a cheque locally or pay me cash. One had to be brought over personally by a senior manager from their head office in England. The HR Manager told me I had to sort it out as this could not continue.”
Andrew could only get an account with a local credit union. “My money gets paid to them and I have to draw out a saving cheque which I then have to cash in a money shop, which costs me 9% each time. One bank sent me a letter telling me not to re-apply as I could damage my credit rating. I don’t want to try again as the banks don’t seem to want to help.”
Andrew still has no basic bank account and continues to pay a fee to cash his cheques.
(* not his real name)
Note
The two banks that do offer basic bank accounts to bankrupts are Barclays and The Co-operative Bank. Those who provide them, but not to undischarged bankrupts are: Abbey Santander, Alliance & Leicester, Bank of Ireland, Bank of Scotland, Clydesdale, First Trust Bank, Halifax, HSBC, Lloyds TSB, Nationwide Building Society, NatWest, Northern Bank, The Royal Bank of Scotland, Ulster Bank and Yorkshire Bank. More info at: www.moneymadeclear.org.uk/HTML/en/products/bank_accounts/basic_bank_accounts_popup.htm
To read a copy of Called to account and to hear Tony Herbert, one of the authors of the report talk about the issues in a podcast visit www.citizensadvice.org.uk/called_to_account