Banks turn their back on the bankrupt

17 September 2012

banksTimes are tough. In the 12 months to June, there were 35,456 bankruptcy orders in England and Wales alone, according to the Insolvency Service. Now, it is possible (and some would argue necessary) for an undischarged bankrupt* to get hold of a bank account, although this would have to be a basic type account, with no overdraft facility, no monthly fee and limited debit card capacity. However, while basic bank accounts are normally available to all, those available to undischarged bankrupts has now narrowed to a field of one.

Previously both Barclays and the Co-operative bank allowed bankrupts to take out an account, but after much corporate soul-searching, Co-op have decided to withdraw from the market, leaving these people without a choice of bank account provider. You could argue that beggars shouldn’t be blessed in the options department, but what happens if Barclays decline to offer you an account?

In this day and age, having a bank account is tantamount to a necessity. Many employers require salaries to be paid by credit transfer, and if you are scoffing at the thought of bankrupts with a job, the new Universal credit benefits system will also require a bank account for payment.

But Co-op are defending their right to remove themselves from the market.  John Hughes, managing director of retail banking at the Co-op told the BBC: "Across the industry there has long been an un-level playing field in the provision of basic bank accounts, with our bank doing far more than most, and we have been calling for some time for this to be addressed."

And you have to feel they have a point. Co-op, even with the new branches and customers purchased from Lloyds TSB do not have a 30% share in the retail banking market, but claim that 30% of their customers have been through some kind of insolvency proceeding, representing about two-and-a-half times its "natural market share".

Robin Taylor, the Co-op's head of banking, told BBC News that a lot of people who were made bankrupt were already with a bank and should therefore be supported by the institution they were previously with. He also wants every major bank to take a share of the remainder.

So are (most of) the banks, Co-op included, being unfair? Surely taking on a bankrupt, particularly one who has already gone bad on you, must seem like throwing good money after bad to the banks, institutions more widely known for maximising shareholder profits than customer satisfaction. Unusually Barclays appear to be the hero of the blacklisted- is this suitable penance for their less-than-savoury shenanigans of recent times? Does anyone even care?

* a bankrupt is normally undischarged for 12 months following the bankruptcy order.

TOPICS:   Banking   Debt

18 comments

  • Kevin
    'Surely taking on a bankrupt, particularly one who has already gone bad on you, must seem like throwing good money after bad to the banks' Yep. There is also the point that generally speaking they don't have to accept anyone if they don't want to. One of the reasons we are in the state we are in in because of people defaulting on loans, especially mortgages, we rip into the banks for giving away money that doesn't get paid back but then expect them to... give away money to people with a proven record of not paying money back. What are they supposed to do?
  • Haggis
    @Kevin - Talk about missing the point. With a basic bank account no lending takes place, so the bank would not be giving away money to the bankrupt person.
  • badger
    Yeah Kevin, you drongo. Cuh!
  • Paul A.
    I am at a loss, why exactly will banks not give standard current accounts to bankrupt people, what exactly could they actually loose from this? No lending is taking place. Just seems like a selfish "kick them when they are down" approach , for no reason what so ever.
  • The i.
    Wrong Kevin.....Stop living in moral fibre wasteland
  • Dick
    @ Haggis, no lending but they would be expected to provide services for free. The bank has to fund its services somehow.
  • james d.
    yeah I don't get it either. If there's no credit facility what's the problem.
  • foxes
    Can they not just charge a monthly fee for the basic bank account. Say £15 a month? That should cover the bank's costs and let people still keep their account.
  • David
    Aimed at Dick's comment above: The Bank makes its money on a basic bank account by paying no interest. The Bank invests every penny that the account has as a credit balance thus gaining interest. In the days before the Banks became bookmakers and casinos, this was how they made their money.
  • Al
    @foxes - Charging a fee would be an ideal solution for the banks but can you imagine the headlines? Greedy banks kicking people when they're down by charging them extra? Since even with a fair fee the banks aren't making money off basic accounts, why bother with the negative publicity?
  • sicknote
    I like bankrupt people, I can buy all their stuff cheaply.
  • Marc
    The point is the banks make no money off these accounts. So presumably trying to reduce losses. Also your credit score is based on how much money a bank can make off you, not only how good are you at paying your debts.
  • Chewbacca
    @Paul Ayre LEARN the difference between "loose" and "lose", you utter cretin.
  • Mustapha S.
    A bank taking on someone who is bankrupt is like a school employing a paedophile. Banks like to offer customers who have accounts loans, credit cards overdraft facilities etc. If banks can't/won't give credit, how are they going to make money?
  • tin
    by charging £15 a month for it as has already been suggested
  • Mustapha S.
    And if they're down to their last £10 every month? Didn't think that through did you.
  • badger
    @ Chewbacca Calm down dear. It's like the difference between "floor" and "ground". Nobody cares.
  • Dick
    @ David: > The Bank invests every penny that the account has as a credit balance thus gaining interest. Yes, but these people usually have Sweet F.A. So virtually no interest is made.

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