Charities have ‘growing sense of worry’ about banking services, warns regulator

21 Jun 2023 News

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The Charity Commission has urged banks to take action to prevent existing banking issues faced by charities from “being prolonged any further”.

Speaking yesterday at an All-Party Parliamentary Group on Charities and Volunteering event, the regulator said that individual banks need to “step up their levels of customer service” and better understand the nuances and diversity within the charity sector.

The event, organised by NCVO, heard from sector representatives and leaders including Different Strokes, Charity Finance Group (CFG) and UK Finance, the membership body for the banking and finance industry.

Panellists discussed the challenges of charity banking and what more could be done to ensure charities can manage their finances properly.

‘Growing sense of worry about banking services’

The panellists said that charities have long faced banking challenges including “difficulties accessing accounts, finding new accounts or having their accounts suddenly closed or frozen, with very little communication about when they might be available again or what trustees need to do to resolve that”.

Sam Jackson, assistant director of policy at the Charity Commission, said that “there is definitely a growing sense of worry about banking services”.

“That’s something we hear time and time again at the Charity Commission. It comes through on our phone lines, it comes through when we do public meetings with trustees, and it’s very rare that we do a charity visit without this issue of being raised with us.

“During Small Charity Week, it’s really important to remember the voluntary nature of trustee roles. Charities have a lot on their plate at the moment, particularly in the cost-of-living crisis, so the last thing they do need is this extra layer of frustration that’s been described and the anxiety around the banking services that they’re able to access.”

Banks urged to ‘step up’ customer service levels

Jackson acknowledged that banks operate in a “highly regulated environment”, citing money laundering checks and the know your customer procedures, and face commercial pressures.

However, he said: “Ultimately, we can’t make headway into this problem without commitment from individual banks, considering their wider social responsibility as well and putting proportionate resource into help rectify common service issues and the blockages that have been described over the course of this session.”

He added: “There is also a need for banks to step up their levels of customer service, and I think that is linked […] to building understanding within banks of the nuances and diversity that we have in the charity sector in terms of the type of charity, their legal structures, their sizes and the digital expertise […].

“So clearly, the banking issues charities face are not new and we do need targeted action to prevent them from being prolonged any further.”

‘Poor banking services’ at local level

Austin Willett, chief executive officer of Different Strokes, told attendees that his charity has experienced poor banking services at local level.

He said that his organisation has a network of about 30 volunteer-led groups, with incomes ranging from a few hundred to a few thousand pounds, and all have their own bank accounts.

“Firstly, one bank we have, which we have a number of accounts with, has made it virtually impossible for us to set up online banking with them. There are simply far too many hoops to jump through, it’s far too bureaucratic. The vast majority of groups has effectively given up trying to do online banking with this bank because it’s just so difficult.

“Secondly, updating signatures on the account is extremely difficult. Sometimes to get an update done, all existing signatories may have to sign a form, which is a challenge if some of these people have left the organisation. On more than one occasion we’ve done this, paperwork [went] through to a bank and it’s been lost and we’ve had to do it again.”

Willett said that there are three main issues with banks: a general dismissiveness of their customers, a general lack of understanding of how charities work and a lack of interest from some banks in having charity accounts. 

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