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Concerns About Bank Accounts During Scottish Trust Deeds

4th February 2013

Last year we reported on serious concerns that bankrupts may not be able to get a bank account from one of the “High Street” operators. This followed news that Co-op Bank had withdrawn from the market. At the time this only left Barclays amongst the well-known banks that were prepared to service this significant market.

While both are forms of personal insolvency, protected trust deeds in Scotland and bankruptcy (sequestration) are two different things. This meant that we were able to report at the time that pretty much all of the major banks were still willing to offer a basic bank account to someone that was using a Scottish trust deed.

Towards the end of 2012 we wrote about a UK government intervention aimed at encouraging the banks to promote financial inclusion. The proposal was that an amendment would be made to insolvency law which would allay the fears expressed by some banks regarding their liability for certain issues when providing an account to a bankrupt. At the time the feeling was that banks were likely to make progress on this issue.

Certain threads that have been running on our forum recently seem to indicate that the market may in fact be moving in the other direction. We appear to be witnessing moves by certain financial institutions to further diminish financial inclusion rather than to promote it. In particular, two major financial institutions appear to have made decisions that will be unwelcome to clients (and potential future clients) that are in protected trust deeds.

Firstly we read reports on other forums that Lloyds were proactively closing the accounts of clients that they established were in an IVA. A trust deed is very similar to an IVA which leads to the obvious fear that the same could happen for some Scottish account holders in the future. Many of our forum members were naturally very concerned about this situation.

We checked with Lloyds (today) whether their basic account (the Cash Account) was available if you were in a trust deed. They could not give us a clear answer which indicates that there may well be no blanket policy. They indicated that an applicant would simply be assessed by the banks own decision-making process (which involves credit checking).

The more “complete” accounts from Lloyds (that often come with credit facilities) are much less likely to be available if you are in a protected trust deed. Anyone that has one may wish to consider opening up a back-up account elsewhere in case it becomes needed.

Secondly we have now discovered that Nationwide will no longer offer an account to you, even a basic account, if you’re in a protected trust deed. We should of course say that Nationwide is a building society rather than a bank (technically… in practical terms you cannot distinguish them). This was a shock to us as they were (until today) on our page of recommended accounts to use during a trust deed. They had only been added to the page after we carefully checked with them that the account was available in such circumstances. Something appears to have changed at Nationwide.

By way of conclusion it seems that the bank account market for people with previous debt problems appears to be somewhat in flux currently. Given the absolute necessity of having a bank account we encourage readers to be certain in their own minds that their own banking facilities are unlikely to be withdrawn. Where there is a concern we strongly suggest proactively opening up a back-up bank account before any problem might occur.

Banks and buildings societies should be judged on their actions rather than their words. They may claim to play their part in encouraging financial inclusivity, but in their actions some are going the other way.

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Wylie & Bisset Grant Thornton

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