Bankrupts 'need better bank access'

Edward DaveyPeople who have been made bankrupt should be offered better access to bank accounts to help them get back on track, the Government said.
The Insolvency Service has launched a consultation into how financial access can be improved for undischarged bankrupts, who face added expenses if they cannot use a bank account to receive wages or pay bills.

Business minister Edward Davey described a bank account as an "essential stepping stone" to help people manage their finances and to get them back on track after facing up to their difficulties.

He said: "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."

While bankruptcy can be a "fresh start" for people who have been overwhelmed with debt, this can become a hurdle to obtaining a bank account, the Insolvency Service said. There is no law that specifically prevents a bankrupt from holding a bank account, but it is the bank's decision whether to offer an account.

A trustee can, in very limited circumstances, consider chasing the bank for loss of money following a bankruptcy. For this reason, most banks will not offer even a basic account to undischarged bankrupts, the Insolvency Service said.

Possible courses of action the Government will take include promoting providers who currently provide such access to bank accounts. Two high street banks currently offer basic bank accounts to undischarged bankrupts. The Government is also looking at setting up a voluntary code for banks to agree to provide such accounts and providing guidance for trustees in bankruptcy.

Banks could have a clearer indication of the likely risk of a claim and perhaps be reassured that it was unlikely. The Government said it could intervene with legislation if non-statutory options look unlikely to make the situation better.

Laws could be amended to reduce or remove any potential liability on a bank. The consultation, which aims to gauge the scale of the problem, will close on February 9.

© 2011 Press Association
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