Banks: Vulnerable Customers

Lord Cashman Excerpts

Monday 21st December 2015 Lords Chamber

[Lord Cashman (Lab)]

My Lords, I congratulate the noble Baroness, Lady Hayter, on securing this important debate. For clarity, perhaps I should point out that although my name is Cashman, I am not a banker.

I have been concerned for some time, as someone who lives in a part of London that is both extremely rich and extremely poor, about the disparity in access to banking services—namely, ATMs. Often when people cannot get to bank ATMs, they have to pay an additional charge when they use them in places such as newsagents. Branch access is another big issue, and the need for clear and jargon-free accounts and information from front-line staff who are properly trained. Equally, as one who has known the concept of vulnerability both personally and within my family, I recognise, as my noble friend Lady Hayter pointed out, that there is a wide definition of “the vulnerable”. Indeed, even those who would be described as vulnerable do not see themselves as being in that category.

However, lots of excellent work has been done. Once again, I congratulate and commend the House of Lords Library service and the documentation it has produced on this issue, which highlights the need for much more to be done—if necessary, with the force of legislation.

I welcome the moves by the European Commission, following its consultation and recommendation, for a directive that would create a right—I repeat, a right—for European citizens to open a payment account with basic features, irrespective of their financial circumstances. The directive specifies minimum standards that include: transactional services, direct debit, a payment card, ATM access and the absence of any overdraft. This directive must be supported by all member states.

The banking industry generally has spent more than £300 million, which is to be welcomed and recognised. However, retail banks are not matching minimum standards and many are on a race to the bottom as they seek to freeze out those who require the most basic account in order to function in the modern world, and indeed to gain access to internet services and the competitive processes and prices on the internet, such as low-priced energy deals or telecom deals when paying by direct debit or standing orders.

Banks that have shown real commitment—it is worth mentioning them—are: Barclays, which still remains the only retail bank that will open accounts for undischarged bankrupts; the Co-operative Bank; and Lloyds. The latter two also carry the largest number of basic accounts and thereby the biggest burden, which should be shared more equitably. The Nationwide Building Society has a good record in this area, too, as does Metro Bank, which prides itself on accessibility and welcoming new business.

Here I will address a related issue, of start-up charities and the appalling hurdles and almost insurmountable obstacles that are placed in their way when trying to open an account for a newly established charity, foundation or trust. My own experience is that building societies and virtually all high street banks do not want to open new accounts for charities. The one and only bank that facilitated the process and welcomed this new business was Metro Bank, which complied with all aspects of law and due diligence and showed how it can be done. It is shameful and shocking that other high street banks have turned their backs on such business. I can only surmise that it is because this is an area of work that causes them to work.

To return to the main issue, the vulnerable in our society are being let down by the majority of banks, which will have a tremendous negative impact on the poorest and most needy in our society, especially when we see universal credit rolled out and increasing reliance on payments into and out of banks. People are undoubtedly going to suffer unless something is done. In the Library document there is an appalling catalogue of poor services, poor information, sharp selling, phone lines which cost the user an additional fee by the minute—0845 numbers, and others—continued interdepartmental referrals where people already under stress have to repeat the issue and their circumstances again and again. There is a catalogue of pre-tailored responses to people who are trying in all good will and faith to notify their banks of potential financial problems due to ill-health, bereavement, redundancy, and so on. The catalogue of complaints which have been upheld by the Financial Ombudsman does not make pleasant reading.

Quite frankly, it is shocking that people in need of basic services, let alone basic understanding and compassion, are left sadly and badly wanting, and often with nowhere or no one to turn to. Yet I must recognize the tremendous work undertaken—often with much reduced resources—by Citizens Advice, the Money Advice Trust, National Debtline and many other charitable organisations. So, too, the work by the FCA, the Financial Ombudsman, the Financial Inclusion Commission, and the work of your Lordships’ House and the other place in the report of the Parliamentary Commission on Banking Standards. In particular, I will refer to the recommendations of the commission, most notably paragraphs 290 and 291, which can be summarised:

“The Commission believes that banking the unbanked should be a customer service priority for the banking sector. It should be a right for customers to open a basic bank account irrespective of their financial circumstances. The Commission expects the major banks to come to a voluntary arrangement which sets minimum standards for the provision of basic bank accounts. The failure of the most recent industry talks and the apparent unwillingness of some banks to engage constructively in coming to an agreement is a cause for concern … In the event that the industry is unable to reach a satisfactory voluntary agreement on minimum standards of basic bank account provision within the next year, the Commission recommends that the Government introduce, in consultation with the industry, a statutory duty to open an account that will deliver a comprehensive service to the unbanked, subject only to exceptions set out in law”.

I note that the British Bankers’ Association vulnerability task force, under the chairmanship of Joanna Elson, will report in March 2016. Notwithstanding that, I look forward to the Minister’s reply and in particular to hearing not what we should or must do but what we are going to do, and when, to address this major problem which disadvantages so many people from so many different backgrounds and perspectives and which, as I know only too well, could affect any one of us.