Proposals have been published asking for evidence about the effect bankruptcy has on the ability of individuals to access a bank account and inviting views on possible measures to improve access.
Bankruptcy can be a fresh start for people who have got into an unmanageable debt situation but as a consequence it appears it may lead to difficulties getting a bank account, which hinders their financial rehabilitation.
Without access to a bank account, bankrupts may struggle with basic tasks such as receiving wages and paying bills and this can result in additional expenses for them.
Whilst there is no law that specifically prevents a bankrupt from holding a bank account, it is a decision for a bank whether to offer an account.
A trustee can, in very limited circumstances, consider pursuing the bank for loss of money from the bank account following a bankruptcy. For this reason, most banks will not offer even a basic account to undischarged bankrupts.
Business Minister Edward Davey said:
“Access to a bank account is an essential stepping stone to help people manage their finances and to get them back on track after facing up to their financial difficulties.
"Without access to a bank account, even the simplest financial transaction is beyond reach for an undischarged bankrupt. What I want to see are financially capable consumers who are able to effectively manage their money, and make the fresh start they need.
“If evidence suggests that there are some people that are struggling to get a bank account, I want to see what can be done to help improve their circumstances.”
The purpose of the consultation is to gain information about the number of people affected, which will help inform whether or not formal intervention is needed to improve access to bank accounts for people who are bankrupt.
The possible courses of action include:
- Promote providers who currently provide access to bank accounts for undischarged bankrupts – currently two high street banks offer basic bank accounts to undischarged bankrupts.
- Establish a voluntary code for banks – Banks, building societies and other banking service providers already operate under a voluntary code of practice which covers certain products and services and encourages those organisations to provide clear information. The banks could sign up to a code to agree to provide accounts to undischarged bankrupts.
- Providing guidance for trustees in bankruptcy - drafting further detail about the circumstances in which a trustee should consider a claim against a bank and when they are unlikely to, the banks would have a clearer indication of the likely risk of a claim and perhaps be reassured that it would be unlikely
- Introduce legislative change - If non-statutory options seem unlikely to improve the situation, legislation could be amended to reduce or remove any potential liability on a bank.
The consultation seeks to gather evidence on the problem and to explore possible solutions. Interested parties should respond to the consultation. The consultation will close on 9 Feb 2012.
