Bankrupts denied even basic current accounts
THOSE that have been declared bankrupt are finding it difficult to obtain even a basic bank account, Citizen's Advice research has revealed.
The nationwide advice charity has found that just two out of seventeen banks (Co-operative bank and Barclays) were offering a basic, no credit, bank account to those who have recently been made bankrupt.
It usually takes at least twelve months for a bankruptcy to become discharged, wiping the financial slate clean for the future.
In the interim, those declared bankrupt need to start putting their financial lives back together again.
Without the support of even a basic or 'jam jar' bank account that can be near impossible.
Citizens Advice started looking into the mainstream banks' attitude to those declared bankrupt after getting feedback from bureau staff that clients who had been made bankrupt were finding it increasingly difficult to make a fresh start as a result of the dearth of suitable products.
The charity noted that living without a current account made those who had been made bankrupt dependent on the accounts of friends or family, an added pressure during an already difficult time.
Bankrupts were often forced to carry around large amounts of cash, bureau staff noted.
Cash is increasingly difficult to use to pay for essentials such as utilities and without a bank account it's impossible to take advantage of the discounts, and extra security, available for those that set up direct debits or have wages paid by BACS, the only option offered by many employers.
Gillian Guy, Chief Executive of Citizens Advice called on banks to change their practices. "Just because someone is made bankrupt it doesn't mean their life stops," he said.
The banks' attitude
So why are banks so reluctant to offer bank accounts to those declared bankrupt?
It might seem like a silly question - after all, a bankruptcy indicates a high amount of risk which banks are unwilling to take on. However, the kinds of accounts offered to those who have been declared bankrupt aren't, themselves, fraught with risk for the banks.
These basic bank accounts come without any way to borrow through an overdraft and often only offer a basic cash card for ATM withdrawals.
As Citizen's Advice point out, it just doesn't add up. "The banks who exclude undischarged bankrupts say that they are concerned about potential liability," Mr Guy added, "[yet the] two banks that do offer these accounts have told us they experience no difficulties."
In fact, it seems more likely that banks are unwilling to offer these accounts because they cost money to provide.
Not only are many financial providers not providing these accounts, then, those that do don't like to advertise them or even offer them to those declared or discharged bankrupts who are rejected for a normal current account. It's all very under the counter.
Away from the mainstream
Frustrated, bankrupts often turn away from the mainstream banks altogether.
Post Office card accounts and accounts from alternative providers such as Credit Unions can also be options for those whose bankruptcy has not yet been discharged.
Prepaid cards (more on these here) are also an option, though these come with fees both for loading the account and, often, for spending, something which gained criticism earlier this year from Government in respect of use by those on benefits.
Often those declared bankrupt go on to use combined account/money management services such as ThinkBanking or CardOneBanking.
The idea with these services is that, for a monthly set-up fee as well as a one-off joining charge, the company manages the account holder's income, paying bills and commitments from one account and allowing the cardholder to spend the remainder through a spending account with a debit or prepaid card.
These final options, in particular, hardly seem preferable to joining the mainstream banks though.