By Ruth Alexander
Reporter, Radio 4's Money Box
The government says there are better options for benefit payments
Many people who try to open a basic bank account are wrongly refused, Money Box has learned.
Basic bank accounts are like current accounts, but offer no overdraft or cheque book.
They should be an option for people who do not qualify for a current account because they have a history of bad debt.
But Gordon Wilson, from Glasgow, told Money Box he has been refused a basic account at RBS, Natwest and the Bank of Scotland, on exactly these grounds.
"All three have said that due to outstanding debts I have, I've not been able to pass a credit score, and they are not willing to provide a bank account for me," he said.
The Citizens Advice Bureau (CAB) said staff see a lot of people who have been turned down for banks because they have been credit checked.
Policy officer Tony Herbert said, "This does seem somewhat bizarre given these accounts offer no credit.
BASIC BANK ACCOUNTS
Six out of 17 basic accounts do not offer debit cards. Source: FSA
1.75m people have no access to a current or basic account. Source: HM Treasury
There are 8m basic bank accounts in existence. Source: BBA
"Unfortunately, what we find happening is that bank branch staff will automatically enter someone's details into a computer to see what account they are suitable for.
"When it comes back that they have had difficulty with debt or credit in the past, they refuse them."
And he said this can have ramifications for people trying to get a job - employers tend to want to pay your wage electronically, in which case, you need a bank account.
Because he cannot open a basic account, Mr Wilson's Job Seekers' Allowance is paid into a Post Office Card Account, which he said makes life inconvenient and expensive:
"I can't have any direct debits or standing orders set up. It means I've got to use a pre-payment key for my electricity, which incurs extra charges.
"Also I'm not able to take advantage of any discounts that would be available for paying by direct debit."
This information needs to get down to branch level, down to counter staff level
Exchequer Secretary to HM Treasury
When he needed to furnish his flat, Mr Wilson's lack of payment options meant he had to walk around Glasgow with up to £1,000 cash in his pocket.
The British Bankers' Association (BBA) said banks are not obliged to accept customers if they are bankrupt, or if they have a record of fraud - neither of which applies to Mr Wilson.
But it said customers should not be refused a basic account because of their credit history.
Bank staff 'need training'
The Exchequer Secretary to HM Treasury, Sarah McCarthy-Fry, told Money Box that she would take up the issue with the banks:
"I think it's happening at the lower end. Maybe the staff are not being trained properly.
"This information needs to get down to branch level, down to counter staff level."
The three banks Mr Wilson approached - RBS, Natwest and Bank of Scotland - all said they do not refuse people with poor credit histories.
Although the Bank of Scotland admits branch staff sometimes do make mistakes.
Lack of debit cards
But Money Box has found that there is also a wide variation in terms of what the different basic accounts offer.
Six out of 17 basic bank accounts - about a third - do not offer a debit card, according to the latest figures from the Financial Services Authority.
These include big names like Santander, HSBC and Nationwide.
Debit cards allow customers to pay for goods electronically in shops and online.
This lack of access to basic banking services is being blamed for the rising number of people who have benefits loaded directly onto pre-paid cards.
Mr Herbert, from CAB, said, "We know of people with mobility problems who want to do their shopping online but do not have a debit card.
"Hence people are pushed to considering alternatives such as pre-paid cards, which in many instances incur great costs."
Ms McCarthy-Fry agreed the accounts do vary, and that customers should choose one that does offer a debit card.
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