A deal has been reached between HM Treasury and 9 UK banks for a new fee-free template for basic bank accounts. Account holders will have no cheque books or overdraft facilities, but will have ATM cards and direct debit and standing order facilities.
The plan is to get Brits with a bad credit history back into the banking system, or reduce the financial burden for those already in the system. People with a bad credit history, i.e., bad credit, have had problems in the past paying back debts.
Approximately nine million people have basic bank accounts in Britain.
Some account holders have had to face escalating fees after initial charges were levied following standing order or direct debit payments that bounced.
The one-off fees will be scrapped under the new terms.
New account holders will get certainty and clarity, said to Andrea Leadsom, Economic Secretary to the Treasury.
“It will end people being effectively locked out of their basic bank accounts due to high fees and charges when their payments failed,” Ms. Leadsom added.
Ms. Leadsom said “Ending this unfair situation is a real step forward for the banking industry’s most vulnerable customers and improving access to banking is a key part of our long-term economic plan.”
Campaigners have criticized several banks after they stopped basic account holders from using ATMs.
The nine banks that have signed the deal with the Treasury represent 90% of the country’s current account market.
According to the British Bankers’ Association, the benefits of having an account may be as much as £1,300 per year.
Who is eligible for the fee-free basic bank account?
A basic bank account will be available to consumers who meet the following financial inclusion criteria:
Unbanked customers: who cannot get a full-service account.
Existing customers: who are ineligible for a full-service account but currently bank elsewhere and want to switch.
Banked customers: who are experiencing financial difficulties, require an additional account but cannot get a full-service one (regardless of whether their account is with the bank or a different provider).
“Revised Basic Bank Account Agreement,” HM Treasury (PDF).