The Government
would like to see improved access to bank accounts for
undischarged bankrupts. Proposals have been published asking for
evidence about the effect bankruptcy has on the ability of
individuals to access a bank account and inviting views on
possible measures to improve access.
Bankruptcy can be a fresh start for people who have got into an
unmanageable debt situation but as a consequence it appears it may
lead to difficulties getting a bank account, which hinders their
financial rehabilitation.
Without access to a bank account, bankrupts may struggle with
basic tasks such as receiving wages and paying bills and this can
result in additional expenses for them.
Whilst there is no law that specifically prevents a bankrupt from
holding a bank account, it is a decision for a bank whether to
offer an account. A trustee can, in very limited circumstances,
consider pursuing the bank for loss of money from the bank account
following a bankruptcy. For this reason, most banks will not offer
even a basic account to undischarged bankrupts.
Business Minister Edward Davey said:
“Access to a bank account is an essential stepping stone to help
people manage their finances and to get them back on track after
facing up to their financial difficulties. 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.”
The purpose of the consultation is to gain information about the
number of people affected, which will help inform whether or not
formal intervention is needed to improve access to bank accounts
for people who are bankrupt. The possible courses of action
include:
• Promote providers who currently provide access to bank accounts
for undischarged bankrupts – currently two high street banks offer
basic bank accounts to undischarged bankrupts.
• Establish a voluntary code for banks – Banks, building
societies and other banking service providers already operate
under a voluntary code of practice which covers certain products
and services and encourages those organisations to provide clear
information. The banks could sign up to a code to agree to provide
accounts to undischarged bankrupts.
• Providing guidance for trustees in bankruptcy - drafting
further detail about the circumstances in which a trustee should
consider a claim against a bank and when they are unlikely to, the
banks would have a clearer indication of the likely risk of a
claim and perhaps be reassured that it would be unlikely
• Introduce legislative change - If non-statutory options seem
unlikely to improve the situation, legislation could be amended to
reduce or remove any potential liability on a bank.
The consultation seeks to gather evidence on the problem and to
explore possible solutions. Interested parties should respond to
the consultation on www.bis.gov.uk/insolvency/consultation
The consultation will close on 9 Feb 2012.
Notes to Editors
1. The public consultation on Bank Accounts for Bankrupts is set
to run for 12 weeks. The consultation seeks to gather evidence and
offers a range of possible statutory and non statutory solutions.
The consultation, Bank
Accounts for Bankrupts can be found here www.bis.gov.uk/insolvency/consultation.
2. In England and Wales only two high street banks offer
undischarged bankrupts access to a current account meaning that
some are left without any access to a bank account, which forces
them to operate on a cash basis for the duration of their
bankruptcy. In July 2010 Citizens Advice published their report
‘Called to Account’ stating that the current situation was causing
undischarged bankrupts undue hardship. As a financial inclusion
issue, having to operate on a cash basis means that transactions
are more expensive and more difficult for this group of people.
Savings cannot be made by using direct debits or online prices and
there can be transactional difficulties receiving wages and having
to make all transactions during office hours.
3. The Insolvency Service administers the insolvency regime
investigating all compulsory liquidations and individual
insolvencies (bankruptcies and debt relief orders) through the
Official Receiver to establish why they became insolvent. The
Service also authorises and regulates the insolvency profession;
deals with disqualification of directors in corporate failures;
assesses and pays statutory entitlement to redundancy payments
when an employer cannot or will not pay employees; provides
banking and investment services for bankruptcy and liquidation
estate funds; and advises ministers and other government
departments on insolvency law and practice. Further information
about the work of The Insolvency Service is available from http://www.bis.gov.uk/insolvency
5. Media enquiries should be directed to:
David Ward – 020
7637 6373
Contacts:
Lorna Dennis
Phone: 020 7637 6279
lorna.dennis@insolvency.gsi.gov.uk