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Banks and other account providers are being urged by the regulator to increase awareness of “no frills” accounts.
Basic bank accounts allow people to make and receive payments but without the availability of an overdraft – and some providers could make it easier to apply for one – according to the Financial Conduct Authority (FCA).
It is encouraging account providers to do more to support those who want a bank account but do not have one.
The FCA said banks, building societies and payment firms are trying to support customers to access accounts.
It is encouraging them to build on examples of existing good practice, such as working with homelessness charities to tailor their support to the needs of customers in vulnerable circumstances.
The regulator said people working in the adult entertainment sector have also experienced issues accessing accounts.
It said account denials or terminations could lead to significant harm for people running those businesses, particularly if they then have to rely on cash or personal bank accounts for their work, with the latter revealing their name to their clients and potentially exposing them to blackmail.
As of June 30 2023, there were 7,363,018 basic bank accounts open across nine providers.
An estimated 1.1 million adults in the UK did not have a payment account or were “unbanked” in spring 2022.
While some people may not want to have an account, being “unbanked” can make it difficult to receive an income or make payments, particularly as cash transactions become less common.
The FCA has asked account providers to review their overall approach to account denials and closures – and particularly to ensure that vulnerable consumers are not losing out.
Providers should also ensure people are not denied access just because they cannot produce standard forms of ID, and make it clear which alternative forms of ID are acceptable, the regulator said.
Consumer groups and charities representing customers in vulnerable circumstances highlighted challenges to the FCA that consumers have faced in obtaining and maintaining an account.
These included, for example, some people with learning disabilities being denied an account because the firm assumed that they needed a power of attorney, while others were denied an account because they could not show a common form of ID, such as a utility bill with their address on it.
Where accounts are closed or denied, the regulator has reminded providers that they should act in line with their obligations under the consumer duty, including communicating in a way that is clear and helpful for customers.
We want to achieve more consistent outcomes, with people being aware of what accounts there are that might be right for them, more support for the vulnerable and people not being denied access without good reason— Sheldon Mills, Financial Conduct Authority
Sheldon Mills, executive director of consumers and competition at the FCA, said: “We want to achieve more consistent outcomes, with people being aware of what accounts there are that might be right for them, more support for the vulnerable and people not being denied access without good reason.”
In 2023, the FCA said it had not found evidence of accounts being closed due to lawfully expressed political opinions. The new report confirms it has not found any further evidence to suggest this is happening.
However, it has asked senior leaders in firms to sign an attestation taking personal responsibility for ensuring rules have been complied with and that they are confident of their future compliance.
