Britain’s biggest banks have been pushing homeless people and those in financial hardship towards unsuitable online applications rather than the basic accounts they are entitled to, the financial regulator has found.
A mystery shopping exercise by the Financial Conduct Authority (FCA) rated a third of experiences with basic bank accounts as poor or very poor. Of 298 interactions across branches and by telephone, just 28% were judged good or very good, 38% fair, 20% poor and 14% very poor.
“FCA finds banks pushing vulnerable customers away from basic accounts, with a third of experiences rated poor or very poor.”
Basic bank accounts are free, do not include an overdraft, and provide essential banking – accepting wages and benefits, allowing debit card payments, direct debits and standing orders – for those who might otherwise be excluded. More than four million people in the UK have such accounts. They are designed for people with a bad credit history, who are bankrupt, or have an official debt recovery plan, and can offer some access for homeless people by working with charities to confirm identity.
Yet the FCA found that banks failed to offer these accounts to people who needed them, particularly those with no fixed address. Some pushed customers in vulnerable circumstances towards online applications to open an account unsuitable for their needs.
Emad Aladhal, director of retail banking at the FCA, said: “Bank accounts are important for financial inclusion, and this is about making sure the very people who could benefit from basic bank accounts are not missing out.”
The nine banks and building societies that operate basic accounts – Barclays, The Co-operative Bank, HSBC, Lloyds Banking Group (including Halifax and Bank of Scotland), Nationwide Building Society, NatWest (including RBS and Ulster Bank), Santander, TSB and Virgin Money – have now agreed to demands from the FCA to make access more straightforward.
They have committed to provide the right account for customers first time, make it straightforward for those without standard ID or a fixed address to open an account, and offer alternatives to online applications for vulnerable people.
Peter Tyler, director of personal banking at trade body UK Finance, said: “We recognise that more can be done to ensure consistently good outcomes for everyone.” He pointed to the Breaking the Cycle scheme, which saw banks working with housing charity Shelter to ensure people with no fixed address had access to an account.
Whether the agreements will translate into better experiences for the most vulnerable – and how quickly – remains to be seen.