Basic bank accounts are to be introduced for people with bad credit history by the end of 2015.
The new accounts will not allow overdrafts or cheque books, and will not gain interest, but without the risk of falling into the spiralling nature of bank charges for failed payments and slipping, unaware, into reserves or unauthorised overdrafts. Current charges are from £6-35 for failed payments when direct debits and standing orders bounce.
The accounts are designed to help those unable to open a current account due to bad credit records. Wages, benefits, tax credits and State pensions will be paid directly into the accounts, and customers will be able to pay bills online. Customers will be provided with debit cards making ATM and over-the-counter transactions possible.
Nine banks, including The Co-op, Barclays, HSBC, Lloyds, Nationwide, RBS and Santander have committed to providing such accounts by 2016. The announcement of the new accounts comes after a deal with the nation’s major banks by the Treasury, allowing people to manage their money with “certainty and clarity.”
Andrea Leadsom, Economic Secretary to the Treasury stated:
“It will end people being effectively locked out of their basic bank accounts due to high fees and charges when their payments failed.
“Ending this unfair situation is a real step forward for the banking industry’s most vulnerable customers and improving access to banking is a key part of our long-term economic plan.”