Banks urged to offer bank accounts to bankrupts

Banks are treating people going through bankruptcy unfairly and banning them from opening even a basic bank account, Citizens Advice revealed yesterday.

Just two out of 17 banks that provide basic bank accounts offer them to people who have recently been made bankrupt, according to the consumer watchdog. This is despite there being no legal reason why undischarged bankrupts  - those who have been declared bankrupt and are not yet allowed to stop paying money back or to do business - should not have access to an account.

Citizens Advice said evidence shows that being denied a basic bank account is demoralising, impractical and makes it extremely difficult for people going through bankruptcy to take control of their finances.

What’s more, without a bank account people are unable to benefit from direct debit discount schemes, monthly payments or online discounts and may even be charged extra to pay bills in cash. Some employers will also only pay wages into a bank account, which can result in people losing their jobs or being unable to find employment.

Gillian Guy, chief executive of Citizens Advice, said: ‘Great progress has been made in improving access to bank accounts for many groups who were previously financially excluded, yet there are still groups, such as undischarged bankrupts, who struggle to open even a basic bank account’.

‘The banks who exclude undischarged bankrupts say that they are concerned about potential liability. This just doesn’t stack up - two banks that do offer these accounts have told us they experience no difficulties. Furthermore both the Treasury Select Committee and an independent Banking Code review have called for more banks to make their basic accounts available to undischarged bankrupts’.

Last year, between April 2009 and March 2010, Citizens Advice Bureaux in England and Wales dealt with over 150,000 enquiries about bankruptcy, an increase of 10% on the previous year.

Alternative options for undischarged bankrupts facing difficulties in opening a basic bank account include Post Office Card Accounts (POCA) and Credit Union Current Accounts.

There are other options but they usually charge numerous fees. POCAs are widely available and can be accessed via counter services nationwide, however aside from benefits, tax credit and pensions payments other deposits (wages, housing benefits, cash, cheques) cannot be made, and there are no electronic facilities for payment or withdrawal.