Finance Choices
Banks robbing the rich and ignoring the poor
UK banks stand accused of making money from well-off Britons, while ignoring their responsibilities to the most vulnerable members of society.
To stop this, a leading think tank has called for banks to be subject to a "universal service obligation".
Currently, 11 per cent of Britons do not have a bank account, three times as many as in the majority of European countries, the New Economics Foundation (Nef) reveals today.
At the same time, figures from Moneyfacts reveal that some 36 per cent of UK bank accounts now require their holders to deposit at least £1,000 a month.
"The banks are cherry picking the most profitable customers - only paying lip service to tackling financial exclusion," said Whitni Thomas, head of access to finance at Nef.
"Their lack of action leaves the most vulnerable marginalised from mainstream financial services, paying more for everyday goods and with no option but loan sharks for credit."
The government introduced basic bank accounts in 2003 which are designed to allow more people to benefit from the advantages of bank accounts.
They let people who would often not qualify for a standard bank account benefit from facilities such as paying bills by direct debit, having pensions and benefits paid directly into accounts, and accessing their money with a cash card.
One of the features of the account is that it cannot go overdrawn, and generally does not include a cheque book.
Evidence from the British Bankers' Association shows that there are about six million UK residents with basic bank accounts.
However, earlier this year Citizens Advice pointed to examples of banks putting "unreasonable obstacles" in the path of those trying to open accounts - such as insisting on certain forms of identification, or not providing any information about basic accounts.
Other problems include heavy fees for missed direct debits, which can be triggered by late payment of benefits or tax credits, and the fact it can take as long as ten days for a cheque to clear using a basic bank account, rather than the three it takes normally.
Nef is recommending today that banks are subjected to a universal service obligation, similar to those applied to the post office, utilities and telecommunications.
"A universal service obligation would guarantee the right to a transactional bank account for the UK's poorest consumers. It should be a simple quid pro quo for the licence to operate in a lucrative and well protected market," Ms Thomas explained.
"In the same way that utilities, postal services and telecommunications are a basic right, a bank account is essential to function effectively in society, a universal service obligation would guarantee this right for all."
To find a top-rate UK current account, go to www.financechoices.co.uk/banks-best-buys.html
To stop this, a leading think tank has called for banks to be subject to a "universal service obligation".
Currently, 11 per cent of Britons do not have a bank account, three times as many as in the majority of European countries, the New Economics Foundation (Nef) reveals today.
At the same time, figures from Moneyfacts reveal that some 36 per cent of UK bank accounts now require their holders to deposit at least £1,000 a month.
"The banks are cherry picking the most profitable customers - only paying lip service to tackling financial exclusion," said Whitni Thomas, head of access to finance at Nef.
"Their lack of action leaves the most vulnerable marginalised from mainstream financial services, paying more for everyday goods and with no option but loan sharks for credit."
The government introduced basic bank accounts in 2003 which are designed to allow more people to benefit from the advantages of bank accounts.
They let people who would often not qualify for a standard bank account benefit from facilities such as paying bills by direct debit, having pensions and benefits paid directly into accounts, and accessing their money with a cash card.
One of the features of the account is that it cannot go overdrawn, and generally does not include a cheque book.
Evidence from the British Bankers' Association shows that there are about six million UK residents with basic bank accounts.
However, earlier this year Citizens Advice pointed to examples of banks putting "unreasonable obstacles" in the path of those trying to open accounts - such as insisting on certain forms of identification, or not providing any information about basic accounts.
Other problems include heavy fees for missed direct debits, which can be triggered by late payment of benefits or tax credits, and the fact it can take as long as ten days for a cheque to clear using a basic bank account, rather than the three it takes normally.
Nef is recommending today that banks are subjected to a universal service obligation, similar to those applied to the post office, utilities and telecommunications.
"A universal service obligation would guarantee the right to a transactional bank account for the UK's poorest consumers. It should be a simple quid pro quo for the licence to operate in a lucrative and well protected market," Ms Thomas explained.
"In the same way that utilities, postal services and telecommunications are a basic right, a bank account is essential to function effectively in society, a universal service obligation would guarantee this right for all."
To find a top-rate UK current account, go to www.financechoices.co.uk/banks-best-buys.html
posted by Bruce Wayne at 9:34 AM
Banks robbing the rich and ignoring the poor
5 Comments:
I know a seriously large part of HPC all has its deposits ready sitting in banks collecting little interest.
We know banks can lend up to 10times the amount of cash in said bank!
If we all remove our money from the bamk and put it into something like gold - these banks would have a significatly reduced opportunity to lend out credit.
I personally could probably reduce lending by about £100,000
I wonder how much more without everyone jumping off the stash the cash bandwagon we could reduce it by ???
The banks offer higher interest rates for accounts that have more money in them. the wealthy can afford to keep more in the bank so they are being favored. Some accounts require that you keep a minimum balance to avoid a service charge, again the disadvantaged person has difficulty keeping the minimum blance and gets hit with the fee.
Having worked at one of the largest banks in america - I can tell you banks do not only cater to the rich. Larger banks are looking for customers across the entire spectrum of wealth.
We had strategic plans from groups like "unbanked hispanics" to customers with $5MM+ in wealth.
if you take deposits for example - banks make money in two ways. 1. Fee Revenue and 2. NII - Net income interest - or the basically the spread they can make on thier deposit holdings.
around here you can get a no fee no frill account for a buck in it, I think you can spend more on buying paper checks than you open the checking account with!
The banks have a target audience in mind, just as car dealerships do. I don't get angry at the BMW dealership because I can't get an M5 (yet!), so I settle for something more in my price range. The beauty of capitalism is that no matter what, there's always a niche. If too many banks are catering only to the rich, it's only a matter of time before a bank will open up targeted toward the middle or lower class...presuming of course that there is a large enough demand to make income.
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