New banking charges will hit low-income customers hardest

17 February 2011

Regulator must carry out stress-testing of any charges and be empowered to ensure fairness

This week another bank will introduce new charges which will negatively impact low-income customers who are already struggling with reduced incomes, joblessness, and mortgage and other sources of personal debt.

FLAC is concerned at the absence of stress-testing or impact analysis on how changes in fees and charges for services affect low income banking customers. Vulnerable customers must be protected and the Government must ensure that low-income people are not excluded further from 'high street' banking services.

FLAC recognises that financial institutions are 'for profit' companies but as a Directorate General of the European Union has pointed out: "Access to financial services such as insurance or banking services plays an important role in the economy and society as a whole, as it not only allows individuals to make use of economic opportunities but also to improve their health, education, and overall well-being.*

From the 21st February, Bank of Ireland customers who do not hold a Student, Graduate or Golden Years account will face new requirements to qualify for free banking. These requirements state customers will need to lodge €3,000 to their account and make 9 debit payments using Banking 365 during the fee quarter. Or alternatively, customers will be entitled to free banking if they maintain a minimum credit balance of €3,000 in the account throughout the fee quarter.

FLAC contacted the Financial Regulator asking if the Regulator could monitor or test the impact of these charges. FLAC Director General, Noeline Blackwell commented: "The nature of the proposed charges seem to mean that those who have large transactions with the bank (such as those who can lodge substantial sums on a regular basis and discharge a high number of bills from their accounts) will suffer the least and conversely, those who cannot make large payments will suffer most.

"The increased threshold for free banking transactions will greatly affect people on lower incomes and social welfare. Social welfare recipients in particular will be unable to avoid these unfair charges and could force many people to close bank accounts, depriving them of access to financial services.

"At a time when so many individuals and families are facing considerable stress and economic hardship the introduction of the new charges is most unfortunate and would appear to be ill considered and deeply unfair."

Other groups, who may be unfamiliar or uncomfortable with internet services, would also be unfairly affected by the charges which require customer to make 9 transactions via telephone or internet banking.



1. FLAC (Free Legal Advice Centres) is an independent human rights organisation which works to promote equal access to justice for all. It runs a lo-call telephone information line giving general legal information and supports a network of evening FLAC clinics around Ireland. FLAC has produced research reports in the area of personal debt: 'An Ends Based Means' and 'To No One's Credit' in 2003 and 2009 respectively.

2. FLAC has examined the proposals as outlined by the Bank of Ireland's own website and 'fee and charges' guide.

Below is how the changes may affect certain categories of customers as well as an explanation of how the charges will apply:

Social Welfare:
Someone in receipt of social welfare will have a quarterly income of €2,444. Therefore they will be unable to lodge the €3,000 required to qualify for free banking transactions which makes the Banking 365 transactions irrelevant in their case.

Minimum Wage:
A person on minimum wage working a 40 hour week will earn €3,868.88 in a quarter after taxes. This would allow them to lodge the requisite amount to satisfy to new requirements. However, they would then need to make nine Banking 365 transactions online or by phone. It should be noted that for the purposes of these payments direct debits and standing orders do not qualify. Therefore people will have to make payments other than these in order to qualify.

How the new Bank of Ireland charges will apply:
If someone does not fulfil the requirements for free banking they will be forced to pay charges on all transactions. There are two options for this; the first is a pay as you go option where every transaction is charged at a fee of 28c; the other option is a flat fee of €11.40 for 90 transactions and 28c thereafter. It is important to note that people will be put on the pay as you go option and must request to be put on the flat fee option. The difference here is that 90 transactions at 28c come to €25.20 while the flat fee would only have been €11.40.


* Quoted from an article by Geraldine Hynes of the Equality Authority in the Expanding Equality Protections in Goods and Services. The European Commission report quoted was from the final report from the European Commission DG Employment, Social Affairs and Equal Opportunities into a Study on the use of Age, Disability, Sex, Religion or Belief, Racial or Ethnic Origin and Sexual Orientation in Financial Services, in particular in the Insurance and Banking Sector.