Consumer minister ‘disappointed’ over withdrawal of bank account for bankrupts
New consumer minister Jo Swinson has said she is disappointed to hear that The Co-operative Bank is withdrawing its basic bank accounts for undischarg…
New consumer minister Jo Swinson has said she is disappointed to hear that The Co-operative Bank is withdrawing its basic bank accounts for undischarged bankrupts.
The bank made the announcement earlier this week and said it had no choice but to carry out the move if it is to remain competitive and avoid taking on too much risk.
Barclays is now the only bank where people who have been made bankrupt can open a normal account 12 months later.
Elsewhere, this kind of customer is only permitted a basic account without an overdraft and often lacking a debit card.
Ms Swinson told BBC News she wants banks to "look again" at how they manage financial inclusion and to work with the government to help those who have found themselves in trouble.
"Removing options, where there is already limited choice, will only harm those needing access to basic banking services," she warned.
Commenting on the news, the British Bankers' Association agreed with the Co-op and said taking on bankrupt customers does open them up to more risk and therefore greater expense.
According to the most recent figures from the Insolvency Service, there were 27,390 individual insolvencies in England and Wales in the second quarter of 2012, including 8,088 bankruptcies.
However, the number of bankruptcy cases was down 27.1 per cent on the corresponding quarter of 2011, which could be down to 11,346 Individual Voluntary Arrangements (IVAs) being taken out.
Indeed, bankruptcy orders have been lower than IVAs for the past five quarters and people struggling with debt might benefit from learning more about the latter if they are to resolve their situation.
IVAs involve a negotiated deal involving reduced payments to creditors and anything left owed after five years is written off. Unlike bankruptcy, IVAs are not published in newspapers and will not threaten a person's professional status.
They could also mean greater choice when it comes to banking given the Co-operative Bank's announcement.
By James Francis
