An amendment to insolvency law that reduces financial risks for banks that offer accounts to undischarged bankrupts in England and Wales is now before Parliament as part of the draft Deregulation Bill, Business Minister Jo Swinson said today.
The amendment, brought by the Insolvency Service, will encourage more banks to open their doors to bankrupt people, making it possible for them to take part in day to day transactions just like everybody else.
The changes were introduced following concern from consumer representatives that bankruptcy was stopping people from getting bank accounts – essential for basic tasks such as receiving wages, paying bills or shopping online.
Banking representatives have been concerned that a trustee in bankruptcy could make a claim against them if a bankrupt person failed to declare any funds going through their bank account.
Currently there is no law specifically preventing a person who is bankrupt from holding a bank account. However a trustee in a bankruptcy can, in limited circumstances, consider pursuing the bank for loss of money paid out from the bankrupts account.
Bankruptcy offers a second chance for people who have got into unmanageable debt situations, and allows them a fresh start.
Jo Swinson said:
I am pleased that we are now closer to removing barriers that have prevented banks from providing bank accounts for bankrupt people in the past.
A bank account is not a luxury in this day and age, but a necessity. Most everyday transactions take place online including shopping, paying for utilities and receiving salaries. Last year, over 30,000 people were declared bankrupt and a similar number took up Debt Relief Orders, and it is only right that they get a chance to have bank accounts.
Banks will still make the final decisions on offering accounts but I am confident that the change will make it more appealing to them. It will also offer a new lifeline to vulnerable people who have struggled to access basic financial services.
Citizens Advice Chief Executive, Gillian Guy, said:
This change in insolvency law is a fundamental step towards making sure everyone has access to a bank account. A bank account is an essential part of day to day life; without it people struggle to receive wages and cant pay bills through direct debit. With universal credit around the corner, it is even more important that everyone can get access to a bank account.
I encourage banks to wholeheartedly embrace this change and to start making preparations now to offer accounts to undischarged bankrupts.