A new report from Consumer Focus suggests that Britain’s high street banks are not doing enough to secure basic banking services for poorer and more vulnerable customers.
Consumer Focus recommends that banks set minimum standards for basic bank accounts and that there are risks to the service unless all banks offer a minimum level of service.
Today, Andrew Tyrie, the chairman of the Treasury Committee published correspondence between the committee and the chief executives of a number of basic bank account providers that confirmed that the Bank of Ireland, Clydesdale and Yorkshire Bank, The Co-operative Banking Group, Nationwide, Northern Bank and Ulster Bank have no plans to restrict access to cash withdrawals for basic bank account holders.
He had previously received the same pledges from Barclays, HSBC and Santander earlier this year.
However, Mr Tyrie said he had not received the same assurances from RBS and Lloyds. Mr Tyrie said that this could be a major problem because of the way the cash machine network is linked. RBS and Lloyds have refused to remove the restrictions they have in place on basic bank account holders accessing cash from cash machines run by other banks or third party operators.
"That RBS and Lloyds should want to cut their costs is understandable. But the cash machine network is a cost shared by all banks; if one bank decides to withdraw from the system, it is more likely that others would be forced to follow suit. This is why the action taken by Lloyds and RBS could have serious repercussions.
Mr Tyrie said that the banks who had agreed not to limit cash machine access for basic bank account holders had been unable to promise that they may not do so in the future and that the actions of RBS and Lloyds may cause them to do so.
"It is not just that those affected are amongst the most vulnerable people in society. It is also that, by withdrawing, extra costs are imposed on the banks that remain, and their customers, creating an incentive for them also to withdraw. Then everyone may lose," added Mr Tyrie.
In a report published today, Consumer Focus warned that banks are participating in a “race to the bottom” in how they treat poorer and vulnerable customers who use basic bank accounts.Basic bank accounts were set up nine years ago to help people operating outside of the banking system to access wages and benefits. More than 8 million people use them but banks make little profit from them so there is little incentive for them to operate and manage them.
Consumer Focus is concerned that this will lead to banks running down the services they offer and is calling for a minimum set of standards to be set up.
RBS and Lloyds withdrew access to the Link cash machine network for basic bank account holders earlier this year and the Co-op, a bank that has been one of the main providers of services to basic bank account holders said it will no longer offer such accounts to undischarged bankrupts because it cannot sustain its “disproportionate” market share.
Mike O’Connor, chief executive at Consumer Focus, said: “The last thing these consumers need is a race to the bottom between banks which keep chipping away at the features these accounts offer.
“Without intervention these accounts could become less useful or more expensive for low-income consumers. We are calling on banks to work with Government and regulators to produce minimum standards for basic accounts.”
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