'No Frills' Bank Accounts Urged To Combat Financial Exclusion

Universal, no-frills bank accounts should be introduced to bring financially excluded people into the banking system, the Combat Poverty Agency has urged.

The agency said that 10% of Irish adults do not have any type of bank account and one in five households do not have a current account.

It also warned that Ireland has the fourth highest level of financial exclusion in the 15 long-standing EU states.

Low-income households were the worst affected, the agency warned, with over 60% of people in the lowest income bracket being without a current account, compared to only 2.7% in the highest income bracket.

Kevin O'Kelly, Acting Director of Combat Poverty, said low-income consumers without bank accounts face several negative consequences.

He said: "For a start, people without bank accounts lack security in holding or storing money. This means they are vulnerable to loss or burglary. Secondly, bill payment can be more time-consuming and costly without a bank account and charges can be higher for basic financial transactions such as cashing cheques.

"In addition, it can be more difficult to take up employment or find accommodation without a bank account, while people without a debit or credit card are unable to take advantage of the lower prices of goods and services that can be bought in this way."

Mr O'Kelly said that a lack of access to mainstream financial services meant that many people turned to moneylenders to source credit.

Combat Poverty said that the introduction of basic, no-frills bank accounts on a universal basis would be "an important step" in encouraging the 'unbanked' to become involved in banking services.

The key features of such accounts would be: a debit card with no government stamp duty; no minimum opening or monthly balance; free transactions; direct debit/standing order facilities; a weekly bill payment facility; and no overdraft facility or chequebook, but a 'buffer zone' of €20 daily, to allow customers to withdraw a little more money than is available if necessary.

Mr O'Kelly said: "The Irish banking sector proposed the development of a universal bank account in 2002, and the European Commission has advised that nobody should be denied access to a basic bank account. As such, policy measures should be put in place to ensure that every adult has access to a bank account and an automatic right to a bank account should be guaranteed for children when they reach 18 years."

Mr O'Kelly also said that there had been some progress with the new Irish postal bank and some credit unions introducing products for customers on low-incomes.

The Combat Poverty Agency also recommended the introduction of a special savings scheme for low-income consumers; promoting the electronic payment of benefits; and making basic banking facilities exempt from government stamp duty on debit cards.

(KMcA/JM)