Memorandum submitted by the National Association
of Citizens Advice Bureaux
The CAB Service welcomes the opportunity to
make a submission to the Treasury Committee inquiry into banking.
The CAB Service is the largest independent network of free advice
centres in Europe, with 600 main bureaux and providing advice
from an additional 1,200 outlets.
The Service has two equal aims:
to ensure that individuals do not
suffer through lack of knowledge of their rights and responsibilities
or of the services available to them, or through an inability
to express their needs effectively; and
equally, to exercise a responsible
influence on the development of social policies and services,
both locally and nationally.
In 2000-01, the CAB Service dealt with nearly
6 million enquiries, of which over 1 million queries were about
consumer problems, including debt problems. The advice service
provided by CABx is mainly confined to personal problems, rather
than business problems; therefore our comments are focussed on
banking services for individual customers.
The majority of problems brought to CABx about
banking relate to debts to banks, including bank loans, overdrafts,
mortgages and credit debts and access to banking. The Treasury
report into the effectiveness of banking codes in 2001 ("Cracking
the Codes") addressed our concerns about banks' treatment
of people in debt by recommending further guidance to the Banking
Code on how banks could treat people in financial difficulties
appropriately. We were able to contribute to the content of the
guidance, which is now in place, and we are helping the Banking
Code Standards Board monitor whether banks and building societies
are complying with it.
Why access to banking is an important issue
The CAB Service, however, believes that it would
be appropriate if the Treasury Select Committee would investigate
the issue of access to banking. By 2005, the Government expects
all benefits and tax credits to be paid into claimants' bank accounts
by automated credit transfer (ACT). The transfer will start in
2003. The provision of basic bank accounts, which do not permit
customers to get overdrawn, but allow them to benefit from cheaper
financial services such as fuel and insurance due to direct debit
facilities, is therefore vital to the success of the benefit payment
transfer. The Department of Work and Pensions have told consumer
groups that they will provide benefit claimants with sufficient
information to allow them to make the most appropriate choice
of benefit payment method for their needs and circumstances.
The CAB Service warmly welcomed the recommendations
of the last Treasury Select Committee into Banking and the Consumer
on access to basic bank accounts. However, we are disappointed
to hear from CABx that in practice many people who would benefit
from a basic account find it difficult to access them. Although
there is high-level commitment to basic bank accounts within banks,
evidence from CABx, many of whom have carried out local surveys
into basic banking provision, shows that local bank branches may
have little awareness of basic bank accounts and may actively
promote accounts with credit facilities instead. As a consequence,
people may not be offered any account at all or may end up with
an account which they cannot access through their local post office.
The conclusions of mystery shopping research published by the
Financial Services Consumer Panel in April 2002 supports CAB concerns
on access to basic bank accounts (a copy of the Consumer Panel's
report can be downloaded from www.fs-cp.org.uk).
CABx' experience of access to basic banking facilities
We now summarise the findings of local surveys
of basic banking facilities by CABx and case evidence from CABx
about the barriers to accessing basic bank accounts.
Accessibility of information in bank branches
Bureaux have been concerned that banks were
not publicising the availability of their basic account fully.
Many banks are not producing separate marketing information about
their basic account, but instead include a small amount of information
in general marketing literature about current and savings accounts.
In some cases these leaflets contain only a couple of paragraphs
about the bank's basic account. Several bureaux have commented
that people who want information about basic bank accounts might
have to spend some time combing their way though generic leaflets
to find any information about basic accounts. This might cause
difficulties for people with literacy problems or whose first
language is not English.
Even where banks do produce separate information
about basic accounts, it is not always accessibly displayed in
the branch. For example:
A bureau in Somerset reported that only one
bank in their survey was publicising the availability of its basic
A bureau in Oxfordshire reported that one bank
it visited had on display in the branch its leaflet for its normal
current account, but the leaflet for the basic account was kept
behind the counter.
Local knowledge of basic account
In some areas bank branch staff appear to have
little or no knowledge of their bank's basic account and who it
is suitable for. For example:
One local bank branch told a bureau in Surrey,
that they did not have a basic account, even though the bank did
have such an account in its product range.
A bureau in Warwickshire reported that many
bank branch staff assumed that people opening bank accounts would
be employed; not have any problem producing proof of their identity;
have money for an opening deposit and passing the credit-scoring
A bureau in Kent reported that three out of
eight banks they visited did not know about the forthcoming reform
of benefit payments.
An adviser from a bureau in Lincolnshire who
undertook a mystery shopping survey, reported that when she asked
whether she could have an account despite a bad credit reference,
staff at the local branch of a major bank immediately stated that
she would not get an account with them. The adviser reported that
she felt very embarrassed by the experience and wondered what
people who really needed an account would feel like if they had
experienced such treatment.
A bureau in the North East reported that only
one bank branch out of six visited mentioned their basic bank
account without prompting. The bureau also commented that most
of the banks visited all seemed keen to sell products other than
the basic bank account.
A bureau in Worcestershire reported that one
local bank branch informed them that the basic bank account would
be offered to all applicants who fail the credit scoring procedure,
but pointed out that it was not possible to open an account for
anyone who has adverse information on their credit reference file.
When the bureau queried whether this was necessary as it would
appear that a basic bank account posed no risk to the bank, the
branch responded that if they gave such a person a basic account,
they might eventually apply for a full account which the bank
would have to refuse.
In contrast, only one bureau in Cornwall found
that local bank branches were aware of their basic accounts and
of local social and financial exclusion issues.
Separate/generic application form
Most banks provide separate application forms
for their full current and their basic accounts. However CABx
have found that a couple of banks have a generic application form
for both accountsthose applicants who fail the credit scoring
test would be offered the basic account.
A bureau in Oxfordshire reported that staff
at a branch of one of the banks that uses a generic application
form told the bureau they would not like to "inflict"
the basic account on applicants and that the bank prefers to consider
each applicant's merits rather than forcing them into a stereotyped
It is questionable whether this practice complies
with the requirements of paragraph 3.1 of the Banking Code which
commits its members to "give you information on a basic account
if we offer one and if we think you might be interested in it",
and to "give you information on a single product or service
if you have already made up your mind". It will also make
a nonsense of the Government's commitment to allow people to choose
of the most appropriate method of receiving their benefits and
tax credits in future.
General enquiries desks in bank branches may
not be confidential enough to discuss opening an account, particularly
if sensitive information needed to be discussed. For example:
A bureau in Warwickshire reported that many
of the banks they visited had no separate enquiry desks, and were
concerned that this might deter people from enquiring about an
account, particularly if they were disclosing information about
their employment status and/or current or past financial history
A bureau adviser in Lincolnshire who undertook
a mystery shopping survey of all the banks in their town, contrasted
the different practices of banks she visited. Two banks immediately
offered to take her to a private interviewing room when she mentioned
opening an account. In contrast, others she visited had nowhere
private to discuss such issues and the layout of the branches
was such that it was easy to overhear what was said by other customers
The lack of private interviewing facilities
may put off those people who already distrust financial institutions
from asking about accounts, or even coming into the branch in
the first place.
Money laundering identity requirements
Financial institutions are required under international
money laundering legislation to check applicants' identity and
address before allowing them access to financial services. Strict
interpretation of these rules has led to financial exclusion,
particularly from fundamental financial services such as current
accounts. Although the FSA has recently changed its guidance on
the money laundering rules (see FSA Handbook on Money Laundering
ML 3.1.5-3.1.7) to take account of financial exclusion issues,
many bureaux found that bank branches appeared not to be aware
of the changed guidance and as a consequence many people continue
to be unable to open a bank account. For example:
A specialist CAB debt advice service in South
London reported that its client had multiple debts and needed
a bank account to facilitate easy repayments. She had tried to
open basic accounts with several banks and building societies,
but they had all insisted on a passport or driving licence as
proof of her identity, neither of which she has. The money adviser
provided a copy of the NACAB information system item about proof
of identity which states that the bank can accept other proof
of identity. The client felt too intimidated to take her enquiry
beyond the counter staff, so the money adviser provided a "to
whom it may concern" letter which outlined what proof of
identity she could provide. This eventually proved successful.
A bureau in Essex were trying to help a client
with refugee status to open a bank account. They contacted one
bank which they had been told would be willing to allow refugees
to open an account without a passport. When the bureau rang the
bank, they insisted that a passport would be necessary.
A bureau in Surrey reported that is client had
recently started work and was living with relatives so she did
not have any household bills in her name. She could not open an
account as she had no proof of her address.
A bureau in West London reported that its client,
a refugee with exceptional leave to remain in the UK, had found
it difficult to get work because he could not open a bank account
as the banks do not think he has suitable proof of his identity.
The client has a national insurance number, letters of job offers
(which he has been unable to accept due to the lack of a bank
account), a permanent address and a letter from the JobCentre
as proof of his identity. However, all the banks he has contacted
have insisted on a passport, driving licence, travel documents
or a national insurance number plus wage slips.
However some bureaux did report instances of
good practice in banks being willing to accept different types
of proof of identity:
A bureau in Cornwall reported that the manager
of one local bank branch told them he would be flexible in accepting
proof of identity.
Bureaux in Oxfordshire and Nottinghamshire found
that two banks would be willing to accept recommendations from
existing customers as an acceptable form of ID.
Issues which need to be addressed
The CAB Service believes strongly that swift
effective action is needed to tackle local barriers to basic banking.
We recognise the high-level commitment which banks have given
on widening access to banking, but compliance on the ground in
branches is not consistent. We would now like to see pressure
from Government on banks and building societies to educate their
front-line staff on financial exclusion issues and about their
basic accounts so that any transition that takes place to pay
recipients benefits into bank or building society accounts by
2005 goes ahead with the minimum of fuss. We therefore recommend
that this Treasury Committee inquiry into banking calls representatives
from the British Bankers Association and he Building Societies
Association to give evidence to the Committee about the steps
their members are taking to promote basic banking at a branch
level and to ensure that their front-line staff can give a consistent
message about basic accounts.