Changes to banking charges to effect poorest

Changes made by major banks to basic bank accounts could push more consumers out of the banking system.

By Fusion Lifestyle Reporter
December 8, 2011, 4:47 pm

Consumer Focus is  warning that changes made by major banks to basic bank accounts could push more consumers out of the banking system.

The warning comes as Barclays is making changes to its basic bank account.

This will see a tripling in the maximum daily charge for missed direct debit payments if there are insufficient funds to cover the payment.

A customer could be charged up to £24 instead of the current £8 if three missed payments occur in a day.

All the evidence shows that the risk of these sorts of charges, even if the likelihood is remote of incurring the maximum amount, stops many people from opening a bank account.

This move comes on top of changes from RBS made last month which mean its basic bank account customers can only withdraw cash at RBS group’s cashpoints and not those of other banks.

Consumer Focus fears these moves herald a downward trend in accessibility and penalties on basic banking which could discourage the poorest and most vulnerable customers from using bank accounts.

There are over a million people without a bank account in the UK and others who avoid using their account fully often due to fears around charges. Those without a bank account pay more by not being able to use Direct Debit for household bills or access cheaper internet deals, find it difficult to access mainstream credit, insurance or to save effectively and increasingly will find it difficult to be paid for work.

These changes seem to be going against the Government’s aim to allow consumers to take advantage of better deals for example from paying by Direct Debit for energy.

The watchdog is concerned that higher charges and less accessibility mean the poorest pay the most and get the worst service from banking. 

Oliver Morgans, financial services expert at Consumer Focus, said:

‘These changes to basic bank accounts are a backward step by banks which could increase financial exclusion.

‘Living without a bank account can make it hard to live in the twenty-first century and can create financial penalties for the households who can least afford it. The Government already faces an uphill struggle to persuade customers to sign-up to a bank account when many people distrust banks and the charges they make. These changes will make that hill even harder to climb.

‘Minimum standards are needed to stop a race to the bottom for the poorest banking customers, and we need to see action from the banks and the regulator to make this happen.’

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