A change in insolvency law will require more banks to offer accounts to undischarged bankrupts, the government has announced.
Business minister Jo Swinson said the change, which follows a consultation by the Insolvency Service, will restrict the circumstances under which a trustee in a bankruptcy can make a claim against a bank.
There is currently no law preventing someone who is bankrupt from holding a bank account. But a trustee in a bankruptcy can, in limited circumstances, pursue the bank for loss of money paid out from the bankrupt’s account, which means that most banks will not provide accounts to undischarged bankrupts.
It is hoped that by restricting the circumstances in which a trustee can make a claim, more banks will be encouraged to offer basic accounts to bankrupts.
Swinson said: “Having access to a bank account means being able to make vital transactions quickly and safely, avoiding the risk of carrying around large sums of money.
“Most of us take these everyday tasks for granted, but for bankrupts attempting to make a fresh start, they can be a whole lot more stressful.”
She added that offering an account will remain a decision for the banks but that the change will provide “a new life line to vulnerable people who have struggled to access basic financial services”.
The public consultation on bank accounts for bankrupts ran for 12 weeks from November 2011 to February 2012 and found that at least 18% of bankrupts cannot get their own bank account for the 12 months of their bankruptcy and are forced to use cash or someone else’s account.
Gillian Guy, chief executive of Citizens Advice, said: “The proposed change in the law is very welcome and will mean there is no reason for banks not to provide accounts to these customers.
“The change needs to be brought in as a matter of urgency to help undischarged bankrupts who are currently excluded from mainstream banking.”
According to the Insolvency Service, which administers the insolvency regime in England and Wales, several banks have said they will be willing to change policies once the law is amended.