MSE News: Martin Lewis: 'Stop people on Universal Credit being blocked from switching bank'

MSE_Abby

Millions of people on Universal Credit face a complicated and bureaucratic bank-switching process that could prevent them accessing accounts and deals, MoneySavingExpert.com (MSE) founder Martin Lewis has told the pensions secretary in a letter sent on Friday 12 December. Martin has urged the Government to look into a range of issues after hearing from many MoneySavers who have struggled with the process...

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'Martin Lewis writes to pension secretary: 'Stop people on Universal Credit being blocked from switching bank''

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born_again

Really???

No need to  contact UC etc, as part of the CASS is to inform companies of the change of bank details.
Payment goes to old bank acc, gets transferred to new account & message sent to sender to update details.

Grumpy_chap

Some of the criteria mentioned in the letter in the linked article are within the gift of DWP to alter the methods of verifications - for example accepting the "challenger" banks.

Some of the criteria, such as access to switching incentives, are the commercial decisions of the banks.

The letter seems to conflate the two types of parameters.

SimonFF

born_again said:

Really???

No need to  contact UC etc, as part of the CASS is to inform companies of the change of bank details.
Payment goes to old bank acc, gets transferred to new account & message sent to sender to update details.

Yes, you have to contact the DWP and then have a verification in person at the Jobcentre.

zedonk

I switched bank account lots of times when I was on UC, as I needed the switching cash to make ends meet. In my experience, if I let the CASS take care of it, there was never any problem and the money just appeared in my new account. If I tried to tell DWP I had a new bank account, this was when I had to go into the Jobcentre to prove the new account was mine, and my UC payment got delayed until I'd done that. 

Jodo

Unfortunately the reason why many UC claimants have to change banks is because their previous account got closed by the bank for money laundering. (The bank does not tell the customer this). Obviously this is not applicable in all cases, but it is a very common reason. So it is understandable that DWP are ultra cautious.

SimonFF

Jodo said:

Unfortunately the reason why many UC claimants have to change banks is because their previous account got closed by the bank for money laundering. (The bank does not tell the customer this). Obviously this is not applicable in all cases, but it is a very common reason. So it is understandable that DWP are ultra cautious.

First time I hear this.

JB50MSE

Jodo said:

Unfortunately the reason why many UC claimants have to change banks is because their previous account got closed by the bank for money laundering. (The bank does not tell the customer this). Obviously this is not applicable in all cases, but it is a very common reason. So it is understandable that DWP are ultra cautious.

Can you guide us to factual evidence of your comment from a reliable source or sources? In particular "many UC claimants" - how many? e.g. 145 of 8.3 million Universal Credit claimants? Or a percentage would be useful e.g. 1%, 10%, 50%, or what percentage?
It seems likely that a few UC claimants are involved in money laundering, and a shocking amount of money and criminal gangs may be involved in all sorts of benefit fraud, but "many" makes it sound like you believe a large proportion of 8.3 million UC claimants are involved in money laundering, which seems unlikely. 

However, closing bank accounts is a rather different problem from not being able easily to switch banks (the issue raised by Martin Lewis).

Does everyone know that there is no legal right to enable people in Britain to open a bank account? However, an agreement between the UK government and NINE MAJOR BANKS (my upper case for emphasis) ensures that a basic bank account is available to anyone who meets the basic criteria, even if they have a poor credit history or no prior banking history, according to Shelter
https://england.shelter.org.uk/professional_resources/legal/debt/banking_and_financial_services/basic_bank_account_applications 

In Belgium and France, there is a legal right to open a bank account, according to the Institute of Economic Affairs (see link below). But does that mean that anyone can open any bank account? I'm sure it doesn't, because of course course banks are not charities, they are commercially designed to generate profits. I would not be in favour of forcing every UK bank to offer a basic bank account to almost anybody, and it would seem unreasonable for the UK government to force a bank to give a switching reward to a person with a current poor credit record, or a record of fraud, even if they do permit switching.  

Enabling switching of basic bank current accounts, and rewards for switching are two different things. Although I am very much in favour of regulating banks, and I would like the UK government to help law-abiding people on Universal Credit, I am a bit concerned that new banking regulations and DWP regulations to help people on Universal Credit to switch banks could cause unforeseen problems, and possibly more fraud, unless they are thought through very carefully, and involving all stakeholders, before introduction. Sadly, this is unlikely to be a quick fix.

The DWP may have to be involved somehow (electronically?) because how can a person on benefits prove the source of their funds otherwise, unless they have other legal sources of funds, such as work or pension? Hopefully a person's ID and source of funds can be or could be sourced electronically by banks, these days. Although even then, some of the best bank account deals would not be open to people with poor credit records or no credit record. It takes years to build up a good credit record. 

Closing bank accounts is yet another issue. "....Debanking is a problem in the UK. In 2021/22, UK banks closed 343,000 accounts, up from 45,000 in 2017 when the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR 2017) was passed into law. The reason in about half the cases was the bank’s inability to satisfy itself, to the standards set in response to the MLR 2017, that the customer was not involved in money laundering or terrorist financing (FCA 2023: Section 4). This is a commercially rational response given that the fines for being deemed non-compliant can be in the billions, and that responsible staff can face serious personal penalties."
And  "...Imagine that having your bank account closed were made a criminal penalty. A court could not impose it on anyone without evidence that proved, beyond reasonable doubt, that he had committed the alleged crime. But a bank is not a court, and it is making a business decision rather than imposing a legal penalty. It closes accounts when gathering evidence costs too much, not when the evidence gathered proves the customer to be a criminal. Banks thus impose the ‘penalty’ of account closure on the basis of evidence that would not suffice in a court. Many tens of thousands of innocent people are punished every year."
These are two quotes from the Institute of Economic Affairs, see 
https://iea.org.uk/publications/debanked-the-economic-and-social-consequences-of-anti-money-laundering-regulation/#

SimonFF

Source: trust me bro!