Written by We – that is the New Economics Foundation – believe there is now clear evidence that the UK‘s biggest banks are cherry picking customers for premium accounts and failing to meet the needs of the poorest. That means the poor pay more for everyday services, and have to turn to loan sharks for credit.
The
banks introduced ‘basic’ or ‘no frills’ bank accounts in 2003, but
recent research shows that the account features are unsuitable for
those on low incomes, the banks are failing to adequately promote them
and in cases, are positively discouraging take up.
The
ability to open a bank account is fundamental to participation in
modern economic and social life, and it is time for some kind of
regulation to make sure the banks meet the needs of theUK ‘s
poorest in the form of a ‘Universal Service Obligation’. This would
enshrine an obligation to serve everyone, regardless of potential for
profit, as a fundamental feature of the receipt and continued operation
of a banking licence.
Because,
at the same time, several of the big banks have recently bought into
the sub-prime lending industry. In 2003, HSBC bought Household
International – who had made a record £270 million settlement in a
class action lawsuit in theUS regarding claims about predatory lending in November 2002.
Is it not also time the government acted to:
· Ban unsolicited credit offers.
· Strengthen
the Consumer Credit Bill by defining ‘irresponsible lending’, including
a flexible cap on interest rates and charges – to protect the most
vulnerable from over indebtedness and irresponsible lending.
· Create
a league table of bank performance on basic bank accounts and
initiatives to combat financial exclusion and force banks to disclose
their lending activities.
Do people actually need a basic bank account in order to avoid exclusion, or would a simple prepaid debit card do the trick?
Existing prepaid cards aimed at the poor often carry heavy fees.
I can understand why banks as commercial enterprises might balk at having to provide these types of product as a social service. But if they say there are going to do this, they should do it properly. It’s a great shame that Girobank was sold off in the great orgy of privatisation as that would have been an ideal vehicle for basic bank accounts.
But if you’re going to impose a telecom-style USO on the financial services industry, why not make the USO a debit card rather than a bank account.
Also, when you go down to the social to sign on, why don’t they just give you a Visa card if you don’t already have a bank account. Then they can pay benefit directly to the card.