The research and campaigns department recently conducted a piece of research into the provision of basic bank accounts. National Citizens Advice commissioned this work and it was a follow-up survey to one completed in 2016.

In 2016, the Payments Accounts Regulations implemented the EU Payment Account Directive and as a result the major retail banks and building societies in the UK agreed with the Treasury to provide new basic bank accounts to “consumers in financial difficulty”.  This legal requirement expects “designated credit institutions” to reduce financial exclusion, particularly to people in debt or who are undischarged bankrupts [1], by:

  • Offering ​an​ ​account​ ​to​ ​anyone​ ​legally​ ​resident​ ​in​ ​the​ ​EU​ ​providing:
    • They​ ​don’t​ ​have​ ​another​ ​account​ ​or​ ​are​ ​unbanked
    • They​ ​are​ ​ineligible​ ​for​ ​all​ ​the​ ​banks’​ ​other​ ​current​ ​account​ ​products
  • Not​ ​charging​ ​fees​ ​for​ ​transactions​ ​in​ ​sterling​ ​on​ ​basic​ ​accounts
  • Not​ ​providing ​overdraft​ ​facilities​ ​for​ ​a​ ​basic​ ​account
  • Providing​ ​access​ ​to​ ​basic​ ​account​ ​holders​ for​ ​counter​ ​services​ ​and​ ​ATMs​ ​in the​ ​bank​ ​and​ ​its​ ​partners
  • Allowing​ ​basic​ ​account​ ​holders​ ​to​ ​manage​ ​their​ ​account​ ​both​ ​online​ ​and​ ​in branch.

In​ ​the​ ​UK,​ ​the​ ​“designated​ ​credit​ ​institutions”​ ​are Barclays, Co-operative bank, HSBC, Lloyds (including Halifax and the Bank​ ​of​ ​Scotland), Clydesdale​ ​& Yorkshire​ ​Bank, the Royal​ ​Bank​ ​of​ Scotland (including NatWest and Ulster​ ​Banks), Santander, TSB and the Nationwide​ ​Building​ ​Society.

I visited nine banks and building societies [2] in Bath and spoke with their managers, asking them all the same questions.  I was up-front about being from Citizens Advice and that I was collecting information to enable us to give advice to our clients.

The questions addressed what kind of ID and proof of address was required and how the bank decides which account is appropriate given the circumstances of the person applying.  All the banks and building societies accepted a wide range of documentation from someone in order to prove their identification and proof of address.  Some examples are their passport, driving licence or student ID.  Otherwise any documentation detailing the person’s NI number such as a letter from the HMRC or benefits entitlement letter and a utility bill dated within the last three months or a council tax bill for the year.

In deciding which account is best suited to a potential customer, all of the banks and building societies said they facilitated a credit check as part of the application process.  The score determines which accounts the customer is eligible for and the customer then makes their choice.  They were all very keen to stress that they do not give advice to their customers.

All the banks and building societies confirmed that their basic bank accounts were offered to people in the following scenarios:

  • Someone​ ​who​ ​is​ ​an​ ​undischarged​ ​bankrupt​ ​or​ ​was​ ​recently​ ​approved​ ​for​ ​a​ ​debt relief​​ order ​​(DRO).
  • A​ ​person​ ​who​ ​has​ ​recently​ ​arrived​ ​to​ ​work​ ​in​ ​the​ ​UK​ ​from​ ​another​ ​EU​ ​member state​ ​who​ ​needs​ ​a​ ​bank​ ​account.​  ​They​ ​speak​ ​little​ ​English.​ ​ They​ ​are​ ​on​ ​a​ ​low income​ ​and​ ​in​ ​receipt​ ​of​ ​​​in-work​ ​benefits​ ​and​ ​want​ ​a​ ​bank​ ​account​ ​that cannot​ ​go​ ​overdrawn.
  • Someone​ ​who​ ​has​ ​been​ ​asked​ ​by​ ​government​ ​to​ ​open​ ​a​ ​transactional​ ​bank account​ ​to​ ​receive​ ​benefits.​ ​They​ ​previously​ ​used​ ​a​ ​Post​ ​Office​ ​Card​ ​Account.
  • Someone​ ​who​ ​often​ ​uses​ ​their​ ​authorised​ ​overdraft​ ​and​ ​has​ ​debts​ ​to organisations​ ​other​ ​than​ ​your​ ​bank.

However it would be harder for a person​​ who ​​has ​​an ​​unauthorised​​ overdraft​ and​ other​​ debts​​ to​​ the ​​bank.  This would be subject to approval by the bank manager.  Also, it is important to note that if someone has had a debt written off by a bank then they will not be offered another bank account with any other banks within that banking group.

Whilst all the banks and building societies I spoke with gave the impression that they would discuss the option of a basic bank account to the people who need them most, my main observation is that the process is not always transparent and is more complicated than it needs to be.  For example, not all the banks and building societies call their basic bank account by this name.  TSB call theirs a cash account.
Likewise not all of them proactively promote these accounts.  NatWest said to me, “we do not advertise our basic bank accounts but would offer it if someone does not qualify for our current account” and the Co-op said, “we rely on the customer telling us what they want”.

It​ ​is​ ​clear​ ​to​ ​Citizens​ ​Advice​ ​that​ ​our​ ​clients,​ ​especially​ ​those​ ​on​ ​low​ ​incomes or​ ​in​ ​debt,​ ​value​ ​having​ ​a​ ​bank​ ​account​ ​which​ ​can​ ​help​ ​them​ ​manage​ ​their money​ ​effectively​ ​without​ ​getting​ ​into​ ​debt.​  It seems to me the banks and building societies could do more to promote​ ​and​ ​offer​ ​basic​ ​bank accounts​ ​to​ ​the​ ​people, by​​ providing consistent and forthcoming information, so those in need are in a better position to make an informed choice.

[1] Bankruptcy​ ​law​ ​was​ ​also​ ​changed​ ​in​ ​October​ ​2015​ ​to​ ​remove​ ​the barrier​ ​to​ ​banks​ ​offering​ ​undischarged​ ​bankrupts​ ​current​ ​accounts.

[2] Barclays, CO-OP, HSBC, NatWest, Santander, Royal Bank of Scotland, Halifax, TSB and Nationwide.

Tanya Reid May 2018