While some people may think those who are bankrupt deserve to face harsh restrictions, I say banks are only making the problem worse by treating them like pariahs of society.
Very few people run up debts with a view to going bankrupt. For the average consumer, it’s caused by an unexpected trigger, such as a relationship breakdown or job loss.
For most people, going bankrupt is a last resort and one they usually take after getting professional advice. While many will say people have an outright duty to repay their creditors, it could be argued that if creditors adopted a more supportive approach, there might be less pressure to petition for bankruptcy in the first place.
Unless you’ve been through bankruptcy yourself you can only begin to imagine the stress, trauma and anguish these people go through. And to top it all off, they are then often denied even a basic bank account, which is demoralising, impractical and makes it extremely difficult for them to take control of their finances and make a fresh start.
It means bankrupt people may face the burden of having to ask friends or family members to use their accounts, resulting in a dependence on others. Without a bank account, people are unable to benefit from direct debit discount schemes, or online discounts, and can be charged extra to pay bills in cash. In the worst scenario it can result in people losing their jobs or failing to obtain employment, because their employer can’t pay their wages into a bank account.
So why do banks treat current and previous bankrupts as pariahs of society?
What has bankruptcy or even a chequered credit history got to do with opening a basic bank account? A basic bank account has no credit facilities, no chequebook and no credit card. But it gives the account holder a cash card so at least salary payments can be made direct into the account.
Out of 17 UK banks and building societies only two now offer bank accounts to current bankrupts - the Co-op and Barclays - so why don’t the rest? See list.
It doesn’t wash with me that they cost money to run and are not cost effective. It works well for the Co-op and I am getting good reports about the sympathetic and supportive way they deal with bankrupt consumers.
As far as I’m concerned the banks should, by law, make banking facilities available to all and not just cherry pick their customers. After all, the banks contribute to the bankrupt’s demise. They, like the borrower, could have said no!
There is no risk to the bank from supplying bankrupts with a basic account - If you are not offering money then it cannot be owed.
The banks see it differently though. What worries them is ‘fear of liability’ which they feel may come about if the bankrupt has a windfall or large payment of cash dropped into their account and it is hidden from the Official Receiver (OR) the body responsible for overseeing the bankrupt’s finances. For some reason the bank feels they may be liable if the money goes AWOL.
I’ve heard some pretty lame excuses in my time but I’ve never heard of this happening, and I also fail to see how the bank would be liable.
Are we sowing the seeds of unrest by denying those unfortunate enough to go bankrupt the right to have a bank account? I’m not suggesting they get the full monty of a credit card and overdraft, just the basic account that allows them to function in a modern society where cheques are being phased out.
We need plastic to start a tab in a restaurant, book car insurance on line, make a purchase on the internet or book a holiday.
So now is the time to support those that have had money woes and put them on an equal footing with the rest of society. Many bankrupts actually rebuild over time and continue to pay their way in society through taxes and national insurance contributions.
