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EPR Archived News |
Basic bank accounts failing the basic needs of consumersReleased on = August 25, 2005, 2:30 am Press Release Author = Richard Green Industry = Financial Press Release Summary = Government financial inclusion scheme to provide bank facilities for all is not providing the help required by the most vulnerable Press Release
Body = The lists of bank and savings accounts that are available
to most people are bewildering. A quick look at a comparison site
like Moneynet ( Research carried
out for the National Consumer Council (NCC) ( The new basic bank accounts were introduced as part of a wider push towards ‘universal banking’ and corresponded with the introduction of direct payment of social security benefits to bank accounts as well as the Post Office Card Account (POCA). The plan was that these accounts would also help their users by letting them set up direct debits to pay their utility bills, and so keep better track of their finances from week to week. The accounts
were originally designed to let people save and withdraw money,
but in an effort to prevent extending any existing debts and stopping
the accounts from becoming overdrawn, they don't offer cheque books,
overdrafts or other credit facilities. The accounts were intended
for those with no credit history who might not meet the banks' criteria
for opening a standard current account. The accounts features typically
include the ability for payments, for example pensions and benefits,
to be credited direct to the account, withdrawals by plastic card
through The problems
experienced seem to be partly because the accounts do not always
help those with a small weekly income to deal with the unpredictable
gaps which can occur in wages, benefits or spending. Automated monthly
direct debit payments for goods and services can prove of little
use to many on low weekly based incomes. Those Another problem
experienced was that the holders of these basic accounts are also
liable to be those on low incomes, with low (if any) savings and
are more likely to be in arrears paying their household bills than
those without them. This vulnerable group are less likely than most
to be able to deal with unexpected additional expenditure, such
as an unforeseen bill for home repairs, but without recourse to
any credit facilities, they may be forced into resorting to high
interest loans to The NCC found that “people on low incomes who use accounts to manage their money are more likely to be in arrears with household bills. They are also more likely to have outstanding credit commitments, partly because they have wider access to credit”, than those without accounts. The government
has set a target of halving the number of households which do not
have access to a bank account by 2006. The banks state that they
currently face a lack of demand, however more than two million applications,
in excess of the government’s expected take-up, for the POCAs
have been made. The banks are claiming that reaching the targets
will be difficult, as they are being impeded by various The NCC proposed that basic bank accounts need to be more flexible. Suggestions to make the bank accounts meet the needs of consumers included offering weekly, rather than monthly, direct debit facilities where payments are only triggered if the money is available in the account, occasional payment holidays, and small free ‘buffer zone’ overdrafts. Whether the
lack of interest is due to the banks, the government, or the product
itself, something needs to be done if there is to be an increase
in the take-up rates. Half of those surveyed by the NCC felt they
do not really need an account. An even more damning indictment of
the current basic bank accounts was that a similar proportion of
account holders preferred to withdraw all their income, rather than
leave it in the account, and then manage it as cash. An inclusion
policy may
Web Site = http://www.moneynet.co.uk Contact Details
= E-mail: info@moneynet.co.uk
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