Some of the UK’s largest banks and building societies have agreed to make it easier for vulnerable people to access basic bank accounts after a review by the financial regulator found many customers were being let down.
The UK’s Financial Conduct Authority (FCA) said some banks had failed to properly support people facing homelessness, financial hardship or other vulnerable circumstances, with some customers being directed towards unsuitable online applications instead of being offered a basic bank account.
Basic bank accounts are designed to provide essential banking services for people who may struggle to open a standard current account. They are free to use, do not include an overdraft facility and allow customers to receive wages and benefits, make payments by debit card and set up direct debits and standing orders.
More than four million people across the UK currently hold a basic bank account.
The accounts are offered by major banking groups including Barclays, The Co-operative Bank, HSBC UK, Lloyds Banking Group, Nationwide Building Society, NatWest Group, Santander UK, TSB Bank and Virgin Money UK.
Basic accounts are available to people who may have a poor credit history, are bankrupt or are on a formal debt repayment plan. Some providers also work with charities to help people without a fixed address verify their identity and open an account.
However, an FCA mystery shopping exercise found significant shortcomings in how some customers were treated.
The regulator carried out 298 interactions with banks and building societies, both in branches and over the telephone. Just 28 per cent of experiences were rated as good or very good, while 38 per cent were judged fair. A total of 20 per cent were rated poor and 14 per cent very poor.
Among the concerns identified were failures to offer basic bank accounts to customers who appeared eligible, particularly people without a permanent address. The FCA also found some vulnerable customers were encouraged to apply online for products that were not suitable for their circumstances.
Following discussions with the regulator, the nine providers of basic bank accounts have agreed to improve their processes.
The banks have committed to helping customers access the correct account at the first attempt, making it easier for people without standard identification documents or a fixed address to open an account, and ensuring alternatives are available for vulnerable customers who may struggle with online applications.
Emad Aladhal, director of retail banking at the FCA, said bank accounts play a vital role in financial inclusion and that the regulator wanted to ensure people who would benefit most from basic accounts were not being excluded.
Peter Tyler, director of personal banking at UK Finance, said the banking industry recognised that more could be done to deliver consistent outcomes for customers. He highlighted the Breaking the Cycle initiative, a scheme involving banks and housing charity Shelter, which helps people with no fixed address gain access to banking services.
The FCA said it will continue to monitor progress as banks implement the agreed improvements.
