Select Committee on Treasury Appendices to the Minutes of Evidence


Memorandum submitted by the National Association of Citizens Advice Bureaux

  The CAB Service welcomes the opportunity to make a submission to the Treasury Committee inquiry into banking. The CAB Service is the largest independent network of free advice centres in Europe, with 600 main bureaux and providing advice from an additional 1,200 outlets.

  The Service has two equal aims:

    —  to ensure that individuals do not suffer through lack of knowledge of their rights and responsibilities or of the services available to them, or through an inability to express their needs effectively; and

    —  equally, to exercise a responsible influence on the development of social policies and services, both locally and nationally.

  In 2000-01, the CAB Service dealt with nearly 6 million enquiries, of which over 1 million queries were about consumer problems, including debt problems. The advice service provided by CABx is mainly confined to personal problems, rather than business problems; therefore our comments are focussed on banking services for individual customers.

  The majority of problems brought to CABx about banking relate to debts to banks, including bank loans, overdrafts, mortgages and credit debts and access to banking. The Treasury report into the effectiveness of banking codes in 2001 ("Cracking the Codes") addressed our concerns about banks' treatment of people in debt by recommending further guidance to the Banking Code on how banks could treat people in financial difficulties appropriately. We were able to contribute to the content of the guidance, which is now in place, and we are helping the Banking Code Standards Board monitor whether banks and building societies are complying with it.

Why access to banking is an important issue

  The CAB Service, however, believes that it would be appropriate if the Treasury Select Committee would investigate the issue of access to banking. By 2005, the Government expects all benefits and tax credits to be paid into claimants' bank accounts by automated credit transfer (ACT). The transfer will start in 2003. The provision of basic bank accounts, which do not permit customers to get overdrawn, but allow them to benefit from cheaper financial services such as fuel and insurance due to direct debit facilities, is therefore vital to the success of the benefit payment transfer. The Department of Work and Pensions have told consumer groups that they will provide benefit claimants with sufficient information to allow them to make the most appropriate choice of benefit payment method for their needs and circumstances.

  The CAB Service warmly welcomed the recommendations of the last Treasury Select Committee into Banking and the Consumer on access to basic bank accounts. However, we are disappointed to hear from CABx that in practice many people who would benefit from a basic account find it difficult to access them. Although there is high-level commitment to basic bank accounts within banks, evidence from CABx, many of whom have carried out local surveys into basic banking provision, shows that local bank branches may have little awareness of basic bank accounts and may actively promote accounts with credit facilities instead. As a consequence, people may not be offered any account at all or may end up with an account which they cannot access through their local post office. The conclusions of mystery shopping research published by the Financial Services Consumer Panel in April 2002 supports CAB concerns on access to basic bank accounts (a copy of the Consumer Panel's report can be downloaded from

CABx' experience of access to basic banking facilities

  We now summarise the findings of local surveys of basic banking facilities by CABx and case evidence from CABx about the barriers to accessing basic bank accounts.

Accessibility of information in bank branches

  Bureaux have been concerned that banks were not publicising the availability of their basic account fully. Many banks are not producing separate marketing information about their basic account, but instead include a small amount of information in general marketing literature about current and savings accounts. In some cases these leaflets contain only a couple of paragraphs about the bank's basic account. Several bureaux have commented that people who want information about basic bank accounts might have to spend some time combing their way though generic leaflets to find any information about basic accounts. This might cause difficulties for people with literacy problems or whose first language is not English.

  Even where banks do produce separate information about basic accounts, it is not always accessibly displayed in the branch. For example:

  A bureau in Somerset reported that only one bank in their survey was publicising the availability of its basic bank account.

  A bureau in Oxfordshire reported that one bank it visited had on display in the branch its leaflet for its normal current account, but the leaflet for the basic account was kept behind the counter.

Local knowledge of basic account

  In some areas bank branch staff appear to have little or no knowledge of their bank's basic account and who it is suitable for. For example:

  One local bank branch told a bureau in Surrey, that they did not have a basic account, even though the bank did have such an account in its product range.

  A bureau in Warwickshire reported that many bank branch staff assumed that people opening bank accounts would be employed; not have any problem producing proof of their identity; have money for an opening deposit and passing the credit-scoring test.

  A bureau in Kent reported that three out of eight banks they visited did not know about the forthcoming reform of benefit payments.

  An adviser from a bureau in Lincolnshire who undertook a mystery shopping survey, reported that when she asked whether she could have an account despite a bad credit reference, staff at the local branch of a major bank immediately stated that she would not get an account with them. The adviser reported that she felt very embarrassed by the experience and wondered what people who really needed an account would feel like if they had experienced such treatment.

  A bureau in the North East reported that only one bank branch out of six visited mentioned their basic bank account without prompting. The bureau also commented that most of the banks visited all seemed keen to sell products other than the basic bank account.

  A bureau in Worcestershire reported that one local bank branch informed them that the basic bank account would be offered to all applicants who fail the credit scoring procedure, but pointed out that it was not possible to open an account for anyone who has adverse information on their credit reference file. When the bureau queried whether this was necessary as it would appear that a basic bank account posed no risk to the bank, the branch responded that if they gave such a person a basic account, they might eventually apply for a full account which the bank would have to refuse.

  In contrast, only one bureau in Cornwall found that local bank branches were aware of their basic accounts and of local social and financial exclusion issues.

Separate/generic application form

  Most banks provide separate application forms for their full current and their basic accounts. However CABx have found that a couple of banks have a generic application form for both accounts—those applicants who fail the credit scoring test would be offered the basic account.

  A bureau in Oxfordshire reported that staff at a branch of one of the banks that uses a generic application form told the bureau they would not like to "inflict" the basic account on applicants and that the bank prefers to consider each applicant's merits rather than forcing them into a stereotyped group.

  It is questionable whether this practice complies with the requirements of paragraph 3.1 of the Banking Code which commits its members to "give you information on a basic account if we offer one and if we think you might be interested in it", and to "give you information on a single product or service if you have already made up your mind". It will also make a nonsense of the Government's commitment to allow people to choose of the most appropriate method of receiving their benefits and tax credits in future.


  General enquiries desks in bank branches may not be confidential enough to discuss opening an account, particularly if sensitive information needed to be discussed. For example:

  A bureau in Warwickshire reported that many of the banks they visited had no separate enquiry desks, and were concerned that this might deter people from enquiring about an account, particularly if they were disclosing information about their employment status and/or current or past financial history

  A bureau adviser in Lincolnshire who undertook a mystery shopping survey of all the banks in their town, contrasted the different practices of banks she visited. Two banks immediately offered to take her to a private interviewing room when she mentioned opening an account. In contrast, others she visited had nowhere private to discuss such issues and the layout of the branches was such that it was easy to overhear what was said by other customers and staff.

  The lack of private interviewing facilities may put off those people who already distrust financial institutions from asking about accounts, or even coming into the branch in the first place.

Money laundering identity requirements

  Financial institutions are required under international money laundering legislation to check applicants' identity and address before allowing them access to financial services. Strict interpretation of these rules has led to financial exclusion, particularly from fundamental financial services such as current accounts. Although the FSA has recently changed its guidance on the money laundering rules (see FSA Handbook on Money Laundering ML 3.1.5-3.1.7) to take account of financial exclusion issues, many bureaux found that bank branches appeared not to be aware of the changed guidance and as a consequence many people continue to be unable to open a bank account. For example:

  A specialist CAB debt advice service in South London reported that its client had multiple debts and needed a bank account to facilitate easy repayments. She had tried to open basic accounts with several banks and building societies, but they had all insisted on a passport or driving licence as proof of her identity, neither of which she has. The money adviser provided a copy of the NACAB information system item about proof of identity which states that the bank can accept other proof of identity. The client felt too intimidated to take her enquiry beyond the counter staff, so the money adviser provided a "to whom it may concern" letter which outlined what proof of identity she could provide. This eventually proved successful.

  A bureau in Essex were trying to help a client with refugee status to open a bank account. They contacted one bank which they had been told would be willing to allow refugees to open an account without a passport. When the bureau rang the bank, they insisted that a passport would be necessary.

  A bureau in Surrey reported that is client had recently started work and was living with relatives so she did not have any household bills in her name. She could not open an account as she had no proof of her address.

  A bureau in West London reported that its client, a refugee with exceptional leave to remain in the UK, had found it difficult to get work because he could not open a bank account as the banks do not think he has suitable proof of his identity. The client has a national insurance number, letters of job offers (which he has been unable to accept due to the lack of a bank account), a permanent address and a letter from the JobCentre as proof of his identity. However, all the banks he has contacted have insisted on a passport, driving licence, travel documents or a national insurance number plus wage slips.

  However some bureaux did report instances of good practice in banks being willing to accept different types of proof of identity:

  A bureau in Cornwall reported that the manager of one local bank branch told them he would be flexible in accepting proof of identity.

  Bureaux in Oxfordshire and Nottinghamshire found that two banks would be willing to accept recommendations from existing customers as an acceptable form of ID.

Issues which need to be addressed

  The CAB Service believes strongly that swift effective action is needed to tackle local barriers to basic banking. We recognise the high-level commitment which banks have given on widening access to banking, but compliance on the ground in branches is not consistent. We would now like to see pressure from Government on banks and building societies to educate their front-line staff on financial exclusion issues and about their basic accounts so that any transition that takes place to pay recipients benefits into bank or building society accounts by 2005 goes ahead with the minimum of fuss. We therefore recommend that this Treasury Committee inquiry into banking calls representatives from the British Bankers Association and he Building Societies Association to give evidence to the Committee about the steps their members are taking to promote basic banking at a branch level and to ensure that their front-line staff can give a consistent message about basic accounts.

May 2002

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