Select Committee on Treasury Written Evidence

Memorandum submitted by the Financial Services Consumer Panel

  When I gave evidence to your Committee on 12 October 2004, John Mann asked me to provide evidence of low income consumers having problems accessing bank accounts due to money laundering regulations.

  I said that Citizens Advice have experience of this, and I understand that they are submitting a memorandum to you separately with their up-to-date evidence.

  I wanted to add that the Consumer Panel itself undertook some qualitative research at the beginning of 2002, on access to Basic Bank Accounts for low income consumers. It was a qualitative research project, so was a small sample. Nevertheless, the research showed that, of the 16 mystery shopping applicants—the majority with household incomes of less than £10,000 a year—none were offered a basic bank account. Of those who were refused any account, three out of four were turned down because of unnecessarily strict criteria on identification. I am attaching a copy of the relevant section (para 4.2.9, pages 15-16) with this letter. The full research is on our website—

  In addition, Money Advice Scotland is currently preparing a report on access to bank accounts and indebtedness in Scotland. As the Chief Executive of Money Advice Scotland, Yvonne Gallagher, is also a member of the Consumer Panel, she has kindly agreed that we can give you some of the information in advance of the report's full publication in December. The key points relating to identity requirements in opening bank accounts are on the attached paper.

  We hope that you and the members of the Treasury Select Committee find this information useful.


  Money Advice Scotland (MAS) undertook a questionnaire survey among its Money Adviser members regarding the difficulties that their clients had in opening bank accounts. The following summarises the responses received by MAS from 37 Money Advisers throughout the country and offer a useful insight into the problems and issues.

  MAS researched the existing situation in terms of the ease of access to bank account facilities for those people who use the services of Money Advisers. The above table indicates up to 50 clients per Money Adviser are refused bank account facilities by banks per year. In certain circumstances, this figure rises to over 70 per year and this represents a large section of the community that is financially disenfranchised from mainstream banking services

  Upon further investigation, the typical client types prevented from accessing bank account facilities were those who, in the opinion of Money Advisers, faced the most financial hardship. These groups included those who had previous diligence undertaken against them, unemployed, bad credit history, those on state benefits, bankrupted individuals.

  The issue of whether clients excluded themselves from opening bank accounts was then explored with the Money Advisers. The above comments offer an insight into the level of client confidence in the banking system meeting the needs of the client types while also reflecting the way banks do business that is prejudicial—possibly institutionally so—towards those in need of bank accounts but who, for various reasons, are not allowed the benefits of using the banking system. In essence, the comments offered by the Money Advisers represent two sides of the same coin. Clients will exclude themselves from opening bank accounts due to the perceived attached risks and the fear factor of refusal, of banking practices/procedures and of high charges that would erode their limited income.

  Beyond the issue of perceived attached risks of opening bank accounts, the message is clear that the established banking practice for a client to provide acceptable forms of identification is the most common problem. This would highlight a basic deficiency in the knowledge and understanding by banks of the situation that most clients are in or find themselves in. The range of situations are:

    —  Lack of documents for the homeless, some elderly or the poor who do not have a driving licence or cannot afford a passport.

    —  Where there is a marital/relationship breakdown, the client may have a short history in the address.

    —  Banks do not recognise or accept other forms of ID eg travel documents, immigration documents or tenancy agreements.

    —  Clients with power and gas payment cards have no utility bills to supply residential ID.

    —  There can be a problem when previous debt is shown on bank statements.

  It is also clear that banks need to either be more flexible with their ID documentation requirements or improve their publicity about the less rigorous ID required for basic bank accounts which are more appropriate than conventional bank accounts for these client types.


  Despite several respondents raising concerns about becoming overdrawn or spending too much money, some banks clearly missed the opportunity to offer information on basic bank accounts.

    She just asked me which account and when I said the savers she just went and got the forms. With a current account I was worried that with direct debits and everything I would end up spending too much.

  4.2.8  Whether offered an account

  The level of success varied across respondents:

    —  Four respondents were instantly turned down with no options offered.

    —  Three respondents were likely to be able to open an account on provision of ID which should be available—two requiring their passport (which will be available), and one required to complete a form to join the electoral roll (although this respondent took her passport, and couldn't understand why she was not on the electoral roll).

    —  Nine respondents successfully opened accounts, with seven opening current accounts, and two opening savings accounts, with the respondent choosing these accounts because of their concerns about being overdrawn.

  When it became clear that respondents had NOT been offered basic bank accounts, the researcher prompted the respondent by asking if the bank had mentioned any other types of accounts which were more basic than the current accounts and wouldn't allow them to become overdrawn. ALL claimed that no such account was ever mentioned.

  4.2.9  Reasons for being turned down

  Amongst the four respondents who had their applications rejected, two were refused on the basis of a lack of the necessary identification.

    They asked me for ID. The ID I could provide was my marriage licence and my housing agreement. They weren't enough. It was a driving licence or passport. Well l don't go abroad and I don't drive. But they were the only two proofs of ID they were willing to take, so that's it.

    They said "Are you working?" I said no, I'm looking for work now. "Any identification?" I said I've got my medical card that's all I've got. They said I need three forms of identification before they can do anything for me. Like a driving licence, passport, birth certificate. Which I haven't got.

  On one case the respondent was rejected because of a CCJ.

    She turned the computer round and showed me, and that's what come up, County Court Judgements. They said we can't give you an account because of them CCJ's. You've got no chance of opening one until these run off. I've got to pay them off first and then I can open an account.

  The remaining respondent, was not refused per se, but was offered no alternatives to the references she had been asked for and was unable to provide. This respondent felt the member of staff was far from encouraging.

    I just said to her I'd like a hole in the wall account, no overdraft. Just so when I get cheques or if I have got a bit of money I can put it all in there. She told me to take the leaflet away with me. She couldn't wait to get rid of me basically, you know I was just being a pain in the bum. She didn't really say anything like "No we're not going to give you one" but she did tell me it would be best to take that home and read it. Basically it felt like she was saying don't bother coming back, you're not having one.

  Amongst those rejected there appeared to be little hope of being able to open an account, as this experience was most often not the first time they had been turned down.

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