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
REGULATIONS—THE
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;
— 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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