Today HM Treasury (HMT) published the first data on the number of Basic Bank Accounts (BBA) opened under the government’s 2014 basic bank accounts agreement. A key element of this new-style BBA is that customers pay no fees or charges on the account, thus ensuring that some of the most financially vulnerable customers are not pushed into financial distress or debt due to missed or returned payments. Figures submitted by the 9 participating banks to HMT show that just under half a million new fee-free BBAs were opened in the first half of 2016 (1 January to 30 June 2016).
Sian Williams, Head of National Services from Toynbee Hall, has commented on this news saying:
“This is an encouraging start, given that research estimates that there are in the region of 1.5 – 2 million unbanked adults in the UK. Having a bank account helps people become more employable as they can quickly accept a job offer, and it also helps them access benefits when required. And a bank account is also helpful in cutting living costs as it gives customers access to a wide range of payment methods, which in turn can cut the cost of essential goods and utilities. So access to a fee-free bank account can significantly reduce the cost of the “Poverty Premium”, essentially the additional cost of being poor and financially excluded.
But the data also shows that significant challenges remain before we can be confident that everyone has access to a suitable bank account.
Today’s data shows that just under 4 million customers still have old-style BBAs which include fees and charges. For those on unpredictable or fluctuating incomes, the risk of a bank charge due to a missed payment means many people avoid using direct debits, which also means they miss out on the discounts many companies offer for direct debit payment. Banks were not obliged to move customers on to the fee-free BBAs from the old style accounts, but we had hoped that banks would do this wherever possible. We are therefore concerned to see such a high number of customers still on a fee-charging account, given the financial harm we know these can cause. We are particularly keen to see Lloyds Bank take another look at its customer back book as it alone has over 3.5 million customers on fee-charging accounts due to providing such a large share of the BBA market.
Finally, we encourage the banks and government to continue to work together, along with charities such as Toynbee Hall, to ensure there are as few barriers as possible to accessing an account. The data released today shows that around 19,000 people were refused an account in the first half of 2017. Whilst some of these will be justified refusals due to fraud concerns, past evidence suggests that it is likely many of these refusals were due to customers not having satisfied the bank’s ID requirements. Yet we also know from years of working with the unbanked that many of the most financially vulnerable find it very hard to provide mainstream ID documents such as a passport, driving licence or utility bills. So it is vitally important that banks – working with the government and the regulator – continue to improve the way banks screen out fraud and criminal activity without accidentally denying access to a genuine customer who lacks access to traditional forms of ID.
While this is a good start, we hope to see further work from the banks on moving more customers off of old-style accounts to the new fee-free BBAs, and a renewed effort to ensure lack of ID documents don’t prevent genuine customers from accessing a much-needed account which will help them access employment and increase their financial resilience.”