Figures from the government appear to suggest that up to four million people with basic bank accounts may be paying higher fees than they need to (1).
There are around eight million people in the UK with basic accounts (2). These types of bank accounts offer limited functionality and are specifically designed for customers who aren’t likely to be eligible for a standard bank account.
Since January this year all basic bank accounts should have been completely free of transaction charges, but almost a year on around half of basic bank accounts are still liable for transaction fees. The Treasury figures have revealed that 3.7 million people have accounts that do not conform to the agreement (2).
The agreement was negotiated by the government and the banking industry in 2014. The goal of free basic banking was introduced to attract new account holders after studies showed that millions of customers, many of them vulnerable, still didn’t have bank accounts.
A closer analysis of the figures show that of those not getting the best deal, 3.6 million bank with Lloyds. In fact only 4% of Lloyds basic bank account holders are currently getting the cheapest banking terms. In defence Lloyds has said that it wrote to all its basic account customers, giving them an option to move but not all were eligible. The bank also welcomed the data which showed that “Lloyds Banking Group is opening 36% of the new basic bank accounts, demonstrating our commitment to support banking for all” (1).
Royal Bank of Scotland was the only other bank where some basic account customers have to pay fees. The other major High Street banks were offering customers their best deal. Banks have said that providing basic accounts to the financially vulnerable is a loss making, and larger lenders including Barclays have called on smaller lenders to share the burden (1).
Hannah Maundrell from Money.co.uk reacted to the figures by saying that “Swift intervention is clearly necessary if banks can’t be trusted to treat their most financially vulnerable customers fairly. Fee-free basic banking facilities should be made available to everyone not eligible for a standard current account.” (2)