Charity lambastes banks for unfair treatment to low-income consumers

Charity lambastes banks for unfair treatment to low-income consumers

	Published : Tue, 24 Jan 2006 13:55 By : Paula Demarzio Print this Story

LONDON: Banks tend to create obstacles for low-income consumers in accessing banking facilities, says charity Citizens Advice. The system of tough identity checks is one instance of how the banks put hurdles in the way of low-income people trying to open even basic bank accounts.

The charity, in a report, claimed that nearly three million people in the country, who mostly belong to the low income group do not have a current account and hence depend on expensive high street cheque cashing stores to get cash. Even those who were able to open accounts face the prospects of high bank charges and excessive penalties. .

Citizens Advice said the banks merely pay lip service and instead of helping vulnerable consumers, they either deny access to banking facilities or unfairly penalise them when accounts are opened.

The report cites instances of charges of up to 39 pounds levied for a single failed direct debit, as a result of late payment of benefits or tax credits. It also talks about cases where banks took money out of accounts to pay outstanding debts without asking the customer first.

Such actions can leave the vulnerable customers with too little to live on, put them into rent arrears and expose them to the risk of being evicted from their homes, the charity said.

The banking code in the country enables all the consumers who want to open a current account to do so, but despite the rule, one in 12 households in the country do not have an account, Citizens Advice said.

Teresa Perchard, the charity's director of policy, said many of the most vulnerable are denied access to a bank account in the first place, or unfairly penalised when they open one. Some people with a basic current account had to wait up to 10 days for cheques to clear and were hit with harsh penalties if there was not enough money in the account to pay direct debits, she said.

The British Bankers' Association said the banks are now taking the issue of providing accounts to low income consumers seriously. Since 2003, banks have opened 1.5 million basic current accounts. It claimed that its research indicated that a vast majority of consumers were satisfied with the process gone through to open the account and the functionality.

Citizens Advice, Which? and the National Consumer Council are appearing before the parliamentary Treasury Select Committee as part of an investigation into whether banks are failing low-income consumers.

All benefits and state pensions are now required to be paid into a bank account and this has put the banks under pressure to offer basic accounts with facilities like standing orders and direct debit, but not overdraft.