Co-op stops offering bank accounts to bankrupt customers
Despite its commitment to ethical business practices the Co-op has stopped offering bank accounts to people who are undischarged bankrupts.
Bankrupts are usually automatically discharged from bankruptcy after 12 months and are then freed from bankruptcy restrictions and from the debts owed.
People who are undischarged bankrupts will have access only to Barclays’ Cash Card Account following the Co-op’s decision, which it said was prompted by an “un-level playing field”.
It wants all banks to work equally to offer help to those who have been financially excluded.
John Hughes, managing director of retail banking at the Co-op said:
“Unfortunately it has now come to the stage where our disproportionate market share of the basic bank account market has continued to grow significantly, and regretfully, we now need to take steps to address this.”
Around 30 per cent of the 330,000 holders of basic bank accounts with the Co-op have undergone insolvency proceedings.
Existing Co-op customers will not be affected by the bank’s decision and
Barclays will continue to offer its Cash Card Account to bankrupts, despite the Co-op’s move.
Commenting on the news, the British Bankers’ Association said: “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.
“The banks are currently working with the Department of Business, Innovation and Skills on this issue to ensure as many people as possible enjoy access to the banking system.”
The Co-Op Bank incurred nearly £80 million of charges in the first-half of 2012, hitting group profits.
The charges included a £40 million provision against payment protection insurance compensation costs.
Group pre-tax profits fell by 56 per cent to £69 million in the first-half, while the Co-op Bank recorded a £58.6 million pre-tax loss.