Regulator Highlights Bank Failures for Vulnerable Customers
Several of the UK's largest banks have been found to inadequately serve their most vulnerable customers, according to the Financial Conduct Authority (FCA).
These banks have reportedly directed homeless individuals and those experiencing financial difficulties towards inappropriate online account applications, rather than offering basic bank accounts tailored to their needs.
Basic bank accounts are free, exclude overdraft facilities, and provide essential banking services for individuals unable to open standard accounts.
The nine UK banks and building societies that provide basic bank accounts have now agreed to the FCA's demands to simplify access to these accounts.
Purpose and Providers of Basic Bank Accounts
Basic bank accounts function similarly to regular current accounts but are designed to include those who might otherwise be excluded from the banking system. Over four million people in the UK currently hold these accounts.
These accounts are offered by Barclays, The Co-operative Bank, HSBC, Lloyds Banking Group (including Halifax and Bank of Scotland), Nationwide Building Society, NatWest (including RBS and Ulster Bank), Santander, TSB, and Virgin Money.
Key features of basic bank accounts include:
- Acceptance of payments such as wages and benefits, and enabling account holders to make payments via debit cards, direct debits, and standing orders
- Free of charge with no overdraft facility
- Availability to individuals with poor credit history, bankruptcy, or official debt recovery plans
- Some access for homeless people, facilitated through partnerships with charities to verify identity
FCA Mystery Shopping Reveals Service Shortcomings
The FCA conducted a mystery shopping exercise evaluating 298 interactions across branches and telephone services, which revealed significant issues.
Ratings from the exercise were as follows: 28% of cases were rated good or very good, 38% fair, 20% poor, and 14% very poor.
Problems identified included failure to offer basic bank accounts to those in need, especially individuals without a fixed address, and pushing vulnerable customers towards unsuitable online applications.
New Commitments from Banks
Emad Aladhal, director of retail banking at the FCA, emphasized the importance of bank accounts for financial inclusion:
"Bank accounts are important for financial inclusion, and this is about making sure the very people who could benefit from basic bank accounts are not missing out."
Banks have committed to ensuring the correct account is provided on the first attempt, simplifying account opening for customers lacking standard identification or a fixed address, and offering alternatives to online applications for vulnerable individuals.
Peter Tyler, director of personal banking at trade body UK Finance, acknowledged the need for improvement:
"We recognise that more can be done to ensure consistently good outcomes for everyone."
He referenced the Breaking the Cycle scheme, an external initiative where banks collaborate with the housing charity Shelter to facilitate account access for people without a fixed address.
