Basic bank accounts under threat
Published on 02 November 2012 12:30 PM
Basic bank accounts - which are often held by vulnerable and low-income customers - are under threat, according to a new report by The Consumer Focus group.
The Best of British Banking report has revealed that banks are growing increasingly wary of offering basic accounts, because they are less profitable.
As a result, the Consumer Focus group is calling on the banking industry to establish minimum standards for basic bank accounts.
If they don't, there are fears that cutbacks could result in less useful and more costly accounts for those who are already struggling to get by.
What are basic accounts?
One in five people in the UK has a basic bank account as their only or main account, with an estimated 8.4 million of them in the UK.
The accounts were established almost a decade ago to allow low-income customers access to mainstream banking. Their popularity is growing at a rate of more than 500,000 a year.
They are used by customers who may not meet the minimum criteria for a current account, such as someone who has a poor credit history. The accounts do not usually offer overdraft facilities, or chequebooks.
Call to establish ‘minimum standards'
Mike O'Connor, The Consumer Focus group's chief executive, acknowledged that basic accounts 'will never be the most profitable of financial services'.
But he called on banks to work with government and regulators to establish minimum standards to help basic account holders.
Several banks have recently withdrawn access to the Link ATM network for basic account holders. These include Lloyds Banking Group and the Royal Bank of Scotland Group, which includes RBS, NatWest and Ulster Bank.
In the summer the Treasury Select Committee urged RBS and Lloyds to remove their restrictions on cash machine use, recommending banks should look to give people full Link ATM access.
The report from the Consumer Focus group claims banks may be getting involved in a 'race to the bottom' as they bid to cut back on the cost of offering no-frills accounts.
Copyright Press Association 2012