The government has announced that it will be introducing new rules to make it easier for banks to offer basic bank accounts to people who have gone bankrupt. The move comes after banks have almost uniformly removed the accounts from bankrupts - leaving Barclays as the only provider.
So why has the government had to take this step, and what does it mean for consumers?
The banks had been rapidly withdrawing these accounts from bankrupts. After the Co-Operative bank left the market in September, only Barclays is left offering basic bank accounts to people who have been declared bankrupt. Government consultation found that only 27% people were able to keep their bank account when becoming bankrupt, and 18% were not able to get one at all.
According to the BBC, Consumer Minister Jo Swinson (pictured) has announced: "Having access to a bank account means being able to make vital transactions quickly and safely, avoiding the risk of carrying around large sums of money. Most of us take these everyday tasks for granted, but for bankrupts attempting to make a fresh start, they can be a whole lot more stressful."
The changeThe banks have been concerned that individuals could use the accounts to spend money which should have gone to their creditors. This would leave them open to being sued by people who were owed money by the bankrupt individual.
The plan is to change the rules so that the bankruptcy trustee will have to tell the bank if they have any interest in any new money entering a discharged bankrupt's bank account - so there can't be any nasty surprises later.
Banks will not be forced to offer these accounts, but the government is hoping that if the risk is removed, banks will choose to do so anyway. Robin Taylor, Head of Banking for The Co-operative Bank said:"We withdrew from offering access to un-discharged bankrupts earlier this year with a heavy heart and believe that it is imperative that these changes encourage immediate action from other account providers on this issue."
He added: "We will be monitoring the market closely to see what impact these changes have and would urge banks to voluntarily amend their policy whilst legislation is changed. We maintain our previous commitment to reviewing our withdrawal from offering accounts to new un-discharged bankrupts should all providers begin to genuinely act on this issue."
Mike O'Connor, Chief Executive of Consumer Focus, said it was now up to the banks to take a lead He said: "We've seen a worrying trend of banks cutting back on the features and availability of basic bank accounts recently. Having a bank account is essential to get the best deals or access services and for many employers it is also a prerequisite."
"With these welcome reassurances from Government over undischarged bankrupts we need to see banks other than Barclays offering basic accounts to these consumers as soon as possible. Minimum standards for basic bank accounts are also vital to prevent a further race to the bottom from the industry."