FSA tackles consumer fears on basic bank accounts

To help combat these misplaced fears, the FSA is today launching a free booklet -No bank account? Why it could pay you to have one. This explains how the introductory account, which many banks have begun offering in the past year, works and shows readers how to take their first step into banking.

Deborah Arnott, FSA Head of Consumer Education Services, said:

The FSA is concerned that misplaced fears are holding people back from applying for a bank account when they could benefit from having one.

The FSAs new booklet sets out everything people need to know about opening an introductory account and it also features a very useful table of all the banks offering one, which will help people to shop around for the best deal.

Amongst the poorest section of society (social grade E), almost half of people do not have an account. FSA research has also revealed that there are six distinct groups who do not have bank accounts:

• Socially excluded
  
• Building society users
  
• Anti-bank
  
• Cash only
  
• Debt averse
  
• Financially dependent

An introductory account allows people to:

• deposit and withdraw cash
  
• pay bills by direct debit, saving money and time
  
• have no worries about getting into debt because it doesnt offer a chequebook or overdraft facility
  
• have a card that can be used to get cash from a machine or a bank branch

The initiative forms part of the FSAs programme of activities designed to meet its statutory role of increasing peoples understanding of financial products and services.

50,000 booklets will be distributed through Housing Associations, regional offices of The Big Issue, Further Education Colleges, Citizens Advice Bureaux, libraries and Trading Standards Officers. Free copies are also available from the FSA Consumer Helpline on 0845 606 1234.

Notes for editors

1. NOPs Financial Research Survey interviewed 60,938 adults aged 16+ during Jan-Dec 2000. It found that 17% of adults did not own a current account, including 47% of those in social Grade E.

2. The social grades are defined as:

   A Upper middle class: Higher managerial, administrative or professional

   B Middle class: Intermediate managerial, administrative or professional

   C1 Lower middle class: Supervisory or clerical and junior managerial, admin. or professional

   C2 Skilled working class: Skilled manual workers

   D Working class: Semi and unskilled manual workers

   E Those at lowest levels of subsistence: State pensioners or widows (no other earner), casual or lowest grade workers

3. FSA research has identified six main reasons why people dont have bank accounts:
   • Socially excluded: Mostly men with No Fixed Address or living in hostels. Unemployed or with casual earnings only, such as selling The Big Issue, they see a lack of documentation as being their biggest obstacle to getting an account.
   • Building Society users: typically lower middle class men, aged 30 50 years who avoid banks because of low rates of interest.
   • Anti-bank: a mixed group but mostly more men than women, for whom a major life event such as divorce or bankruptcy has precipitated a break-down in their relationship with the bank and as a result they now prefer using a building society or cash.
   • Cash only: Young (under 25) and middle aged (50+) men and women who feel more comfortable and in control using cash. With their ins matching their outs, they can see no good reason for having a bank account. A common misconception, especially among older women, is that banks would not want their custom.
   • Debt averse: Mainly women, and a range of ages, on a limited income or benefits who associate a bank account with access to things they cannot afford. They regard the prospect of overdrafts, credit cards and loans as a frightening prospect.
   • Financially dependent: mostly housewives who are more affluent and on a higher social grade and are happy to rely on their partner to run the household finances.

4. From 2003, the Government intends to start paying all state benefits and pensions direct into bank accounts.

5. Introductory accounts first became available one year ago. The main difference between these and current accounts is that a current account comes with a cheque book and overdraft facility where as an introductory account usually does not.

6. No bank account? Why it could pay you to have one was produced with help from the British Bankers Association and the Personal Finance Research Centre at the University of Bristol.

7. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

8. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.