Select Committee on Treasury Written Evidence


Memorandum submitted by Citizens' Advice

1.  INTRODUCTION

  1.1  Citizens Advice welcomes the opportunity to give evidence to the Treasury Select Committee's inquiry into the EU single market in financial services. We have been asked by the Financial Services Consumer Panel to provide the Committee with evidence relating to problems experienced by people on low incomes when trying to provide evidence of their identity and address to open a bank account.

  1.2  The CAB service is the largest independent network of free advice centres in Europe, with 496 Citizens Advice Bureaux across England, Wales and Northern Ireland delivering advice and information from over 3,200 locations, including prisons, GP surgeries, county courts and community centres. Recent research by MORI for Citizens Advice found that CAB clients are more likely to fall within the C2DE social classes, have a long-term illness or disability, or live in social housing, than the general population.[14]

2.  MONEY LAUNDERING REGULATIONSTHE SCALE OF THE PROBLEM

  2.1  Citizens Advice does not currently keep detailed statistics on the numbers of people who experience problems opening a bank account due to an inability to provide sufficient proof of identity and address. Nevertheless, Citizens Advice Bureaux commonly report that clients experience problems in proving their identity and address to the satisfaction of the bank.

  2.2  Evidence from CABx shows that those people who are most likely to be affected include:

    —  those with refugee status;

    —  those UK citizens who have never had a driving licence or passport;

    —  homeless people;

    —  those recently released from prison;

    —  married women whose husbands have always been responsible for paying the household bills;

    —  those who have recently moved to the UK (both UK and non-UK citizens);

    —  those people with no household bills (eg those who pay their fuel by pre-payment meters, or those who rent a room in a house); and

    —  young people still living with their parents.

  2.3  Citizens Advice accepts that it is necessary for financial institutions to check on individuals' identity and address when applying for financial services to combat financial crime. However, the way in which financial institutions put the legislation into practice reinforces financial exclusion.

  2.4  Citizens Advice believes that there are two main problems. Firstly, it is not that individuals cannot provide any evidence of their identity and/or address, but rather that bank branch staff will only accept certain documents as proof. The lack of flexibility is the key problem. These are usually a driving licence or passport for identity and a utility bill for address.

  2.5  For example:

    A CAB in Cambridgeshire reported that a woman faced losing her job because she could not open a bank account due to lack of proof of her identity which was acceptable to the banks. Although she had birth and marriage certificates, these were not acceptable.

    A CAB in Herefordshire reported that a German national working as a nurse had approached every bank and building society branch in two local towns to open an account for payment of her wages. All had refused to open an account for her as she did not have a utility bill. The client had a German passport and national ID card, a form from the Criminal Records Bureau, and a letter from her employer giving details of her job, confirming her address and stating the date she started work. She did not have a utility bill as she was renting a room in a house and the bills were not in her name.

    A CAB in Gloucestershire reported that a Somalian refugee with exceptional leave to remain in the UK was unable to find work as he could not open a bank account. Both employers and agencies stated that he needed an account before they could offer him work. The client had approached two banks but they would not accept letters from the Home Office and IND confirming his immigration status, even though they contained his name and his photograph.

  2.6  Secondly, individual banks have different policies as to what kinds of documents they will accept. These policies also change from time to time. For example:

    A CAB in Shropshire reported that a debt client with mental health problems could not open a basic bank account to control her income and make offers to her creditors as she did not have proof of her identity. She lived in a small market town with only four banking outlets. Currently her benefit was paid into an overdrawn current account which the bank was using to pay other debts. The CAB approached the head office of one bank about the client's lack of acceptable identity documents. The head office agreed that a letter from the CAB and the Community Mental Health Team would be acceptable; however the local branch of the bank would not accept these documents.

  2.7  Problems are particularly acute in those areas of the country (HB pathfinder areas) where the government are piloting reforms to housing benefit legislation for private tenants. These reforms include payment of housing benefit into a bank account. Unfortunately, housing benefit cannot be paid into a post office card account, so most claimants either have to open a bank account or be paid by cheque. Only those deemed to be vulnerable by the local authority can have their housing benefit paid direct to their landlord. The following cases show the problems and consequences of not having a bank account:

    A CAB in one of the HB pathfinder areas reported that a single man in receipt of means-tested benefits needed to open a bank account for payment of housing benefit. The bank he approached kept asking for more and more ID. Firstly they asked for a doctor's letter and the client paid £5 for a letter which confirmed that he had been a patient for nine years. However the bank subsequently refused to accept it. The client then approached another bank. He showed them his TV licence, but this was not acceptable to the bank—they insisted on a notification of renewal notice. The client felt frustrated that he had wasted both time and money.

    The same CAB reported another client with refugee status could not open a bank account as local banks would not accept his UN travel document as acceptable proof of identity, even though the Home Office would accept it. The client was getting cheques to pay his rent, but he could not cash them. He was worried that he would lose his home because he could not pay the rent.

    Another CAB in a HB pathfinder area was contacted by a landlord who wanted to tell the CAB about the problems experienced by her tenants who could not open a bank account. Consequently their housing benefit was paid by cheque, but they had no free means of cashing them. The landlord told the CAB that her tenants had to use a pawnbrokers or cheque cashers to cash the cheques, incurring a hefty fee each time, thus reducing their income.

  2.8  Although a minority of tenants in the pathfinder areas do not have bank accounts, the issue of access to banking, including acceptable proofs of identity, is also acknowledged by the local authorities and the DWP, who have recently met with the British Bankers Association to discuss their concerns.

3.  CONCLUSION

  3.1  The FSA's Financial Crime Unit is currently working on a project to develop a standard list of acceptable documents to prove identity and address. Citizens Advice has contributed to and welcomes this piece of work. However we understand that the revised list may not be in place until the end of 2005, so vulnerable people face another year of problems opening bank accounts. The government's proposed legislation on identity cards may also help in the long run, but we are concerned about the potential cost of applying for an ID card.

20 October 2004





14   Unmet Demand for Citizens Advice Bureaux, research study conducted for Citizens Advice, published October 2004. Back


 
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