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Co Op to stop basic accounts for BR
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Bank account exclusion 'rethink' needed, says minister
Banks need to "look again" at financial inclusion after new bankrupts saw the end to a choice of bank accounts, a minister has said.
The new consumer minister, Jo Swinson, said that the Co-op's withdrawal of basic bank accounts for undischarged bankrupts was "disappointing news".
She said the government would continue discussions with the banks.
Barclays is now the only bank to offer a bank account to people in the 12 months after a bankruptcy order.
'Opportunity'
People who have been made bankrupt are generally only allowed to open a basic bank account.
These accounts do not offer overdrafts. Some have a debit card, but only with limited facilities. They do not incur a monthly fee.
On Monday, the Co-op changed its basic Cashminder basic bank account, arguing that all banks should work equally to offer help to those who have been financially excluded.
"The withdrawal of a basic bank account for undischarged bankrupts is disappointing news. Removing options, where there is already limited choice, will only harm those needing access to basic banking services," said Ms Swinson.
"This should be an opportunity for banks to look again at this issue and work with government to make some real progress."
The British Bankers' Association, which represents the UK's major banks, said that banks faced other difficulties if they decided to take on bankrupt customers.
"Banks who accept bankrupt customers open themselves to potential legal challenges from their customer's creditors, who could have a legal claim to money passing through the account," said a BBA spokesman.Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB
IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed0 -
BASFORDLAD wrote: »Derbyshire Building Society cash account suitable for Undischarged Bankcrupts
I double checked this with local branch manager (Beeston) who confirmed it with her manager and said that not a problem opening an account if undischarged bankcrupt
Their customer services have said the same via email as well.Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB
IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed0 -
Their customer services have said the same via email as well.
Thats good
I know this might seem like a rather basic account but at least you can have your wages paid it in, take money out via link cash machines and get cheques/cash out from over the counter.For everthing else there's mastercard.
For clampers there's Barclaycard.0 -
"Banks who accept bankrupt customers open themselves to potential legal challenges from their customer's creditors, who could have a legal claim to money passing through the account," said a BBA spokesman.
Just out of curiosity. What legal challenges could banks face - surely once BR any claims should go through the OR?"Whether you think you can, or you think you can't -- you're right" - Henry Ford0 -
OutofDebt-NOT-OutofDanger wrote: »"
Just out of curiosity. What legal challenges could banks face - surely once BR any claims should go through the OR?
I thought exactly the same; utter rubbish from some banker who knows nothing about the law.0 -
Only feasible risk is this. And that is effectively non-existant.
http://www.bis.gov.uk/insolvency/Consultations/BankAccount?cat=openRisk of Liability
33. A bank may not have a legal defence against a trustee that seeks to claim against them for loss of an asset, but such a claim is very unlikely. A trustee would only consider making a claim where the funds could not be reclaimed from the bankrupt or subsequent recipient of the money that passed through the account.
34. Furthermore the risk to the banks of a successful claim is low as a court is unlikely to find a bank liable. It is unlikely to find the bank had sufficient knowledge of the ‘fraud’ as, in this day of electronic banking a court is unlikely to find that a bank should have made further enquiries before allowing a payment out of the account.
35. We are not aware of a claim ever having been made against a bank for after acquired property. Furthermore there are two high street banks and a limited number of credit unions willing to offer accounts to undischarged bankrupts which suggests that they do not believe there is a serious risk of action.
36. We therefore consider the risk to be very low. Nevertheless banking stakeholders indicate that the perceived risk is sufficient to dissuade them from offering banking services to undischarged bankrupts. This is explored further in the impact assessment.Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB
IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed0 -
Thanks Fermi, very useful: let’s look at the actual wording of the Act referred to in support of that claimed bankers "risk of liability":
Section 307 Insolvency Act 1986:
After-acquired property.
(1) ...the trustee may by notice in writing claim for the bankrupt’s estate any property which has been acquired... since the commencement of the bankruptcy...
(2) ... some exemptions to (1)
(3) ... date trustee’s title to property = date bankrupt acquired it
(4)Where, whether before or after service of a notice under this section—
(a)a person acquires property in good faith, for value and without notice of the bankruptcy, or
(b)a banker enters into a transaction in good faith and without such notice,
the trustee is not in respect of that property or transaction entitled by virtue of this section to any remedy against that person or banker, or any person whose title to any property derives from that person or banker.
(5) ... exclusion of income subject to IPA or IPO
So at 4(b) the reference to “such notice” is a reference to the notice under Section 307 - ie the specific notice of claim to the after acquired property, NOT the original notice of bankruptcy itself. The risk claimed by the bankers in the consultation document following Fermi's link are completely unfounded.
Wonder which trainee GCSE law student advised them on this one?
edit to add
This is shocking, the consultation document prepared by The Insolvency Services states:
28. If the bank acquired the asset in good faith and without having notice of the
bankruptcy order, the trustee cannot make a claim against the bank.
That is simply NOT what the law actually says0 -
basically for the layman, the bank can only be held liable if the bankrupt puts money into the account which the OR claims as an after aquired asset, The OR informs the bank that they are claiming the money and then the bank allows the money to be transfered outHi, im Debtinfo, i am an ex insolvency examiner and over the years have personally dealt with thousands of bankruptcy cases.
Please note that any views i put forth are not those of my former employer The Insolvency Service and do not constitute professional advice, you should always seek professional advice before entering insolvency proceedings.0 -
From the consultation:The Insolvency Act 1986 and the Risk of Liability
17. When a person has a bankruptcy order made against them, a trustee in bankruptcy (either the official receiver or an insolvency practitioner) will take control of any assets of value. The trustee’s main duties are to sell the assets and share the proceeds among creditors. Assets can be those that the bankrupt holds at the point of bankruptcy or any that they acquire before they are discharged, usually 12 months later. The latter is known as ‘after acquired property.’
18. Section 307 Insolvency Act 1986 (s307)13 allows a trustee in bankruptcy to claim after acquired property. Should an undischarged bankrupt acquire property (for example an inheritance) before discharge from bankruptcy, he or she is under a statutory obligation to inform the trustee. The trustee must then decide whether to claim to the property for the benefit of creditors.
19. Given that the property may no longer be in the possession of the bankrupt, s307 also stipulates conditions for the trustee to consider when making a claim for the property. It states that:
“Where, whether before or after service of a notice under this section—
.... a banker enters into a transaction in good faith and without such notice, the trustee is not in respect of that property or transaction entitled by virtue of this section to any remedy against that ... banker, or any person whose title to any property derives from that ... banker.”
20. Where these conditions do not apply the trustee can consider a claim against the bank. The trustee would only consider making a claim where the funds could not be reclaimed from the subsequent recipient of the money that passed through the account.
21. If, for example, the after acquired property was money received into a bank account and then paid out again, the trustee is able to consider claiming for its loss against a banker provided that they have had notice of the bankruptcy. This can be a formal notice from the official receiver, or it can simply be as a result of an application for an account in which an applicant states they are bankrupt. The banker does not need to have been aware of the trustee’s claim against the property in question for the trustee to have a valid claim.
22. Whilst no evidence has been found to show that such a claim has ever been made, banks are keen to avoid the risk of potential liability. If they chose to offer accounts to bankrupts they advise that they would need to put in place a much greater degree of monitoring and oversight to prevent payments out of the account that might subsequently be claimed by a trustee, incurring a much higher cost to the bank than the provision of other accounts which don’t require that oversight. This is not a cost that banks are prepared to incur on accounts
which, because they have no credit facilities, will not yield a profit.
23. The two high street banks that currently offer basic accounts to undischarged bankrupts represent approximately 16% market share of personal accounts. In statements to Citizens Advice, those banks recognised the importance of a bank account for bankrupts in their financial rehabilitation and the role they played in financial inclusion. Risk was not mentioned.Free/impartial debt advice: National Debtline | StepChange Debt Charity | Find your local CAB
IVA & fee charging DMP companies: Profits from misery, motivated ONLY by greed0 -
basically for the layman, the bank can only be held liable if the bankrupt puts money into the account which the OR claims as an after aquired asset, The OR informs the bank that they are claiming the money and then the bank allows the money to be transfered out
In simple terms for the bank all they need to do is freeze the account upon receipt of such notice. If before receiving such notice the funds have gone, then the banker had entered into the transaction “without” such notice.
The shocking point is they and the Insolvency Service all appear to believe that such notice is the notice of Bankruptcy, not the notice of claim under S307 to after acquired property. The distinction changes everything around and vaporises the perceived risk.
Whilst they are all under this misunderstanding the bankers are refusing to deal with undischarged bankrupts.
One for a QC opinion I think.0
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