A recent study concludes that banks are only paying lip service to helping poorer people and many refuse to let them open accounts.
The report cites charges of up to 39 pounds for a single failed
direct debit, triggered by late payment of benefits or tax credits, and
cases where banks took money out of accounts to pay outstanding debts
without asking the customer first.
This can leave vulnerable
customers with too little to live on, put them into rent arrears and
expose them to the risk of being evicted from their homes, the charity
said.
"Many of the most vulnerable are denied access to a bank
account in the first place, or unfairly penalised when they open one,"
said Teresa Perchard, Citizens Advice’s director of policy.
"Our
evidence shows that the consequences and costs of this can be severe,
including escalating debt and the threat of homelessness."
Around
2.8 million people in Britain, or one in 12 households, do not have a
bank account. But as all benefits and state pensions have to be paid
into an account, banks have been under pressure to offer basic accounts
with facilities for standing orders and direct debits that can be
opened with less stringent identity checks.
Even though the main
banks offer basic accounts without overdraft facilities to people on
state benefits, they have been accused of doing little to promote the
service.
A spokeswoman for the British Bankers’ Association said
its members were making "good progress" in halving the number of adults
in households without a bank account by the end of this year.
"Some
1.5 million basic bank accounts have been opened since 2003 and
customers are very happy with the accounts, in particular the fact that
they don’t offer overdraft facilities, which helps them to stay out of
debt."
The report cites examples of low-paid people without a
passport being turned down when they wanted to open an account, while
in other instances, customers who wanted a basic savings account were
advised to open a more costly current account.
Banks often took
10 days to clear a cheque paid into a basic bank account, compared with
three to four working days for a standard account, putting customers at
greater risk of not having enough money to pay a direct debit.
Based
on evidence from 300 Citizens Advice Bureaux, the report said that
despite commitments in the Banking Code to offer basic accounts, many
banks failed to provide any information about the accounts in branches.
The
charity said it told the government’s Treasury Select Committee, which
is examining whether banks are denying the poor access to basic
accounts and credit, that the banks’ behaviour was putting a range of
government policy objectives, aimed at social inclusion of the poor, at
risk.
The charity is calling on banks to make basic bank accounts
available to people in financial difficulties and to provide them with
the same standards of service.
The charity also proposed to cap
charges for failed direct debits and standing orders to a reasonable
amount, offer a buffer overdraft of 10 pounds and an end to the
practice of taking money out of the accounts to pay debts without first
agreeing it with the customer.