Residents without bank accounts at risk of arrears under new benefits system

http://www.theguardian.com/housing-network/2013/dec/02/universal-credit-housing-benefit-banking

Universal credit will be paid directly into bank accounts, but a worrying number of social housing residents do not yet have one
Monday 2 December 2013 07.59 GMT

The government says it will be able to make universal credit payments into a Post Office card account. Photograph: David Sillitoe for the Guardian

The government remains committed to paying the new "universal credit" – a combination of six income-related benefits – directly into bank accounts. This will be a problem for the 13% of housing association residents, and 15% of council residents, who do not have a bank account.

Innovations such as jam jar accounts, run by credit unions, have been much lauded, but where they have been offered take up has been low with many complaining about the complexity and costs involved. Prepaid cards have also been touted as an alternative to a bank account, yet these also come with additional costs the landlord or tenant must incur.

The government says it will be able to make universal credit payments into a Post Office card account or by a PayPoint simple payment card for those without bank accounts. However, landlords and banks could still do more to encourage residents to open basic bank accounts (including those offered by credit unions), and help residents set up direct debits and standing orders.

Some landlords are ahead of the game. They are taking on intermediary roles in which staff are verifying identities and addresses to help open new basic bank accounts for residents. Landlords can also promote basic banking products and refer residents to specific providers or products which they feel best suit their residents.

Most of the banks insist on two forms of identification (typically a benefit award letter and tenancy agreement) and can provide an account that can handle direct debits and standing orders, but no overdrafts. Some also provide balance and payment alerts as well as mobile and internet banking. However, unpaid transaction charges can range from £8 to £25.

Landlords relying on old technology are not helping themselves or their tenants. It's staggering the number of landlords still replying on slow paper mandates to set up bank accounts and direct debits. Those using paperless systems can set up instructions over the phone with residents in minutes – those without can take significantly longer.

Allowing tenants to set the date the direct debit leaves their account also boosts take-up. A straw poll of tenants surveyed by Allpay showed that 85% were more likely to set up a direct debit if they could choose the day the money came out.

Ensuring residents have multiple ways to pay (such as via a text message or through a smartphone app) will also be important as they offer residents the control they feel they have with cash and can be used to top up a direct debit. Text and email reminders have also proven to be a low-cost way to boost collection rates – by over 10% in some cases.

By providing the right support, appropriate flexibility and choice of payment options, landlords can help their residents prepare for universal credit and minimise the impact on their businesses.