FUNT = Financial UNTouchable
Seems appropriate to use it today as Co-operative Bank decides to no longer offer basic bank accounts to undischarged bankrupts and the British Bankers Association issues a statement which, seems to me, is just a nicely worded way of saying “we don’t much care”.
I don’t blame Co-op (@CoopBankPR on Twitter) for doing what they’ve done, they’ve simply decided they can’t share the disproportionate burden of being one of only two institutions (the other is Barclays) that give undischarged bankrupts the ability to transmit money without getting credit.
I do think British Bankers’ Association (@BritishBankers on Twitter) are sadly dismissive of the roughly 40,000 people a year (admittedly probably less this year) who need bankruptcy. In their statement (issued today, 17 September 2012 ) BBA say:
Bankruptcy may be the last option, but it is hardly ever the only option. A very small minority of people in financial difficulties ultimately opt for bankruptcy, and of those who do, fewer still want to open bank accounts while undischarged.
Bankruptcy can be the only option
I disagree with the BBA – I don’t think bankruptcy is anything but the only option for most of those that use it.
My experience of people in an IVA (Individual Voluntary Arrangement) is that many of them choose the option because they want to do the best they can to repay debt. Others, in debt management plans or direct repayment arrangements with their creditors, go bankrupt because their situation has got worse and, frankly it is the only option left (they just aren’t bust enough to get a Debt Relief Order).
I think Co-op Bank are quite right. Undischarged bankrupts don’t need credit but they should be able to use the money they do have efficiently. And, they don’t need the pariah status that not having a bank current account implies. Especially when, at least in part, that pariah status is due to the bank’s inability to trust each other.
Again, the BBA says; “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”.
In most cases, that’s nonsense because it’s just throwing good money after bad (or no) money. And, if all the major banking brands shared part of the burden the risk and reward would be spread and relatively unimportant. So British Banks – accept the burden of de-funting people.
And another thing, people who successfully complete IVAs need to be de-funted too. Spend five years repaying to your creditors absolutely all you can afford and I think something happens: You learn to manage your money. And, you learn to live a lifestyle where you do without several hundred pounds a month.
So, it seems to me that, compared with bankrupts who, yes, suffer hugely, but do walk away from much of their debt, that creditors could recognise the effort put in by people who complete IVAs. More creditors should recognise that people coming towards the end of their IVA should be given access to the remortgage they need to do the best job of repaying their creditors.
They will, probably, have four years of good financial performance behind them and are not being asked to pay anything they can’t, demonstrably, afford – it doesn’t seem much of a risk to me.
Are you a creditor? Can you help?
I’d love to know what creditors policies are towards the credit-worthiness of people who have completed an IVA.
It makes sense to me that they should get better access than bankrupts, but, I just don’t know whether they do.
The credit reference agency Experian (@ExperianJames) don’t know – they say it is down to individual creditors policies:
@andrew_f_smith Interestingly, many lenders treat recent BO/IVA as a policy rule outside of scoring. Then down to the lenders’ own policies.
— James Jones (@ExperianJames) September 13, 2012
So, if you know, please speak up in the comments below.