Select Committee on Treasury Eleventh Report


What is a dormant account?

3. A 'dormant account' is an account where the customer has lost contact with their bank or building society for a sustained period. According to the Government, the most typical reason for an account becoming dormant is a customer failing to inform their bank or building society of a change of address. In other situations the account holder may have died and their legal heirs may be unaware of the account. Poor financial capability, for example a lack of customer awareness of how to run an account, may sometimes be a factor in explaining the dormancy of an account.[4]

Existing schemes for reclaiming dormant bank accounts

4. Individual banks and building societies have processes to reunite owners with their dormant accounts. Those institutions will normally attempt to contact customers in advance of making accounts dormant in addition to their regular customer mailings. Depending on the circumstances, institutions sometimes also undertake other forms of pro-active search to trace customers, such as employing third-party search agents. Central tracing facilities for tracing dormant accounts were introduced by the BBA and BSA in 2001. Their service is free of charge and is covered by the Banking Code. These facilities are designed principally to help customers who believe that they have an entitlement to an account, but are unsure of the specific account-holding institution. National Savings & Investments (NS&I) also runs its own scheme for reuniting dormant accounts with their owners. The key principle underpinning the existing framework for dormant accounts is that customers are given a clear understanding of their right to reclaim their money. Customers can reclaim their money, or reactivate their account, by application to their bank or building society at any time. Until dormant accounts are reclaimed, financial institutions use the funds contained to carry out their business, generating profits for shareholders in the case of a bank—although the BBA told us the profits involved were "immaterial"[5]—and rewards to members in the case of a building society.

The Government's proposals

5. In the 2005 Pre-Budget Report, the Government announced its intention to work with the banking industry in designing a scheme which both preserved the rights of the individual consumer and at the same time allowed dormant assets to be reinvested in the community. The Government then embarked upon a two-stage consultation process with the industry and other interested parties, commencing in March 2007 with the publication of A UK Unclaimed Asset Scheme: a consultation. That paper outlined the Government's proposed scheme in general, proposed changes to the Banking Code and proposals for legislation. A second paper, entitled Unclaimed assets distribution mechanism: a consultation, was released in May 2007, focussing specifically on proposals for the distribution of unclaimed assets for the benefit of communities. The first paper indicated that the Government considered that legislation was necessary for the effective functioning of the proposed scheme. In July 2007, when the Government's Draft Legislative Programme was published, there was an indication that the Government proposes to present such legislation in the next Session of Parliament beginning in November 2007.[6]

The Irish legislation

6. The Republic of Ireland has had an unclaimed assets scheme since 2001. The scheme shares many features with the Government's proposals, but differs in some important ways. The Irish scheme is mandatory and obliges banks, building societies and also An Post—the Irish post office—to transfer the balance of any account that has not had a customer-initiated transaction for 15 years to the National Treasury Management Agency (NTMA). As in the proposed United Kingdom scheme, customers have the right to reclaim their account in perpetuity, and do so through their account-holding bank rather than through the NTMA. Disbursement of dormant account funds is controlled by the Government, and monitored by an appointed board. In 2003, unclaimed life assurance policies were added to the Irish dormant accounts scheme.

4   A UK Unclaimed Asset Scheme: a consultation, para 1.2 Back

5   Q 127 Back

6   Office of the Leader of the House of Commons, The Governance of Britain-The Government's Draft Legislative Programme, July 2007  Back

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Prepared 6 August 2007