We also surveyed all major bank account providers to find out their policies regarding offering accounts to undisclosed bankrupts and people with DROs. This report highlights the great difficulties faced by involuntary bankrupts in England, Wales and Northern Ireland who are unable to open a basic bank account.4 We consider why it is that the majority of banks and building societies refuse to offer their basic bank accounts for this. group of people. Targeted primarily at people traveling abroad and parents, but can also be used by people who find it difficult to open a bank account due to their bad credit history.
Undischarged bankrupts are not people who never had a bank account; they've had bills before and aren't used to living without one.
Repeated rejection
CAB evidence
Problems receiving income
A client who visited a CAB in Surrey was self-employed and was paid by cheque, but had no bank account when he was one. He was able to cash his cheques, but he had to pay a £50 fee each time he did so.
Case study
He was recently granted a DRO and was initially told by his bank that he would be allowed to keep his bank account open. However, he was later told that his account would effectively be closed and his pension balance would be returned to the pension fund. The man was always very loyal to his bank and was not ready to open a new account anywhere else.
Without access to his pension credit, he was left with no money to pay for food. A CAB in East Sussex saw a woman with two children who could not open a bank account because she was an undischarged bankrupt. She had a POCA which she used to receive her benefits, but she could not receive her ex-husband's voluntary maintenance payments as the POCA does not accept this type of payment.
Today, 79 percent are payments directly into bank accounts.”14 In our survey, 43 percent of CAB advisors (23 out of 53) reported that not being able to receive benefits was a serious problem for their clients. The Post Card Account (POCA) may seem to represent a solution for people who are unable to open a bank account as it can be used to receive electronic transfers of most benefits, state pensions and tax credits. So while POCA may be a worthwhile alternative for some, its limitations mean a bank account remains essential for many.
Practical difficulties
A CAB in Surrey reported that an 80-year-old man had come to them for advice. According to the Payments Council, “[t]o years ago 87 percent of benefits and pension payments were made in cash. Wages paid directly by employers, occupational pensions and housing benefits paid by local authorities cannot be received through a POCA.
Zoë said she believes everyone should have the right to have a bank account, just like her and others. I'm not asking for an overdraft, I'm not asking for a card that I can use anywhere other than that bank. They're not interested because they can't make any money from you, and that's how it seems. ”.
Financial disempowerment
Despite these problems, the people we interviewed who used someone else's account to manage their money considered themselves lucky to have someone to turn to for help. The account was managed by a 'money manager' who could decide how to allocate the money between different accounts. She explained how she felt: “I'm not in control and I don't like it...I don't want to be someone who's treated differently than I should be anymore.
It's not a nice feeling...I'd like to just do normal things, without being pulled up and humiliated.” When we interviewed her in April 2010, she still couldn't open a regular bank account. Yes, I made mistakes and I paid for them and I don't want to pay for them anymore.
Paying more for services
While most people who borrow money will pay it back, sometimes people find they can't, perhaps because they lose their job or because their relationship breaks down. It is therefore essential that action is taken to help people who do go bankrupt to make a new start. One simple way to do this would be to broaden access to basic bank accounts for undischarged bankrupts.
And why do most banks still refuse to offer accounts despite repeated calls to do so, for example by Treasury Select.
Why are some banks willing to offer accounts?
Barclays statement
Barclays’ case study
The Co-operative Bank statement
The Co-operative Bank case study
ABCUL
Case Study – White Rose Credit Union
ABCUL statement
Why do other banks refuse to offer accounts?
After-acquired property and disposal of funds
If the bankrupt were to hit the pre-discharge lottery and his winnings were deposited into his bank account, then withdrawn from his bank account and then disappeared, then the banks fear that the trustee could hold the bank liable for not monitoring the account and trying to claim reimbursement these funds directly from the bank itself. If banks were to offer accounts to undischarged bankrupts, the banks argue that they would therefore have to carry out strict controls over the accounts to protect themselves from this. Almost all the banks we surveyed told us that they use the same exclusion for people with DRO and for those who are in bankruptcy without discharge.
It is not clear why this would be the case, as the issue of claiming post-acquired property does not arise in the case of DROs in the same way as it does in bankruptcy. The debtor has a general duty to cooperate with the trustee and to inform him or her of any error or omission in the application, or of any change therein. If the debtor no longer meets the eligibility criteria for the DRO, the trustee can simply revoke it.
Challenging the banks’ objections
The Insolvency Service provided us with a statement (reproduced on the left) in response to the reasons advanced by the majority of banks to explain their position. Section 307 of this suggests that banks will not be pursued for after-acquired property as long as they received the money in good faith and did not receive notice from the trustee. Our efforts to uncover any cases in England, Wales or Northern Ireland where a trustee has attempted to seek a bank for after-acquired property which has passed through the bank account of an undischarged bankrupt and where the bank does not receive notice did not produce anything. .
R3, the Association of Business Recovery Professionals, which represents insolvency practitioners, is not aware of this ever happening. R3 told us it was "not aware of any cases where a receiver has pursued a bank for after-acquired property when they had not received notice." Similarly, the Insolvency Service is not aware of cases where the official receiver acts as receiver.
We therefore see no reason why this problem should constitute a real problem for the banks. Likewise, there appears to be no explicit obligation for banks to undertake an increased level of monitoring by offering accounts to. In the absence of any compelling reason, we can only conclude that their policies serve to limit the number of basic bank accounts they have to provide (perhaps because they are not very profitable) and to punish people for their bankruptcy.
Insolvency Service statement
This seems to be contrary to the desire of the coalition government to promote social. We want to see tangible change brought about so that the experiences of Penny, Zoë, Janette, Jon, Michael and countless others like them are not repeated.
Offering accounts to undischarged bankrupts
They won't see the bigger picture, so for 12 months they treat me like an outcast and then after 12 months I don't want a bank account with them." Great efforts have been made to encourage non-residents to open a bank account for the first time and positive results have been achieved. However, outstanding bankrupts who previously had a bank account but find themselves unable to open a new one have been largely overlooked.
The British Bankers' Association recently stated that "anyone can have a bank account if they want one, unless (and this is rare) the law says they can't."26 However, almost all banks refuse to provide accounts to undischarged bankrupts, although none the law does not prevent them from doing so. The increasing necessity of receiving salaries electronically means that it can be difficult for those without a bank account. Provided that the bank is notified of the bankruptcy, there is no specific legislation or regulation that prohibits a bankrupt without a discharge from opening and maintaining a bank account.
The plight of undischarged bankrupts and the difficulties they face in trying to open a bank account must no longer be ignored. If this rate of insolvency remains constant, by 2015 there will be over half a million people whose current or past insolvency means they may struggle to open a bank account. Once reassurance has been provided to allay concerns about any perceived legal risks, the Financial Service Authority's Banking Conduct of Business Sourcebook (BCOBS) should be amended to include a requirement for all banks and building societies offering basic bank accounts to provide these to pending bankruptcies and persons with DROs, provided they comply with money laundering regulations.
Financial Inclusion in the UK: A Review of Policy and Practice, Joseph Rowntree Foundation, 2008, www.jrf.org.uk. In April 2009, the average gross weekly earnings for full-time workers was Annual Survey of Hours and Earnings, Office for National Statistics, 2009, . www.statistics.gov.uk).
Written by
Citizens Advice Myddelton House
