Treasury committee has lambasted Lloyds and RBS banks for not letting customers with basic bank accounts to use their ATM cards at rival banks’ cash dispensing machines, adding that limiting the withdrawals could lead to a chaotic situation and long queues at the ATMs.

In a report published today, the committee has pointed out that basic account holders are restricted based on cost as each time they use a rival ATM for withdrawal, the bank incurs a charge.

The report observed that the cost savings which were about £10 per account for RBS and £12 for Lloyds were nominal and “have potentially disproportionate effects”. The committee said, “Their (RBS and Lloyds) actions also sit uncomfortably with their stated commitment to basic bank accounts.”

The committee also said that the ban which was introduced by Lloyds in 2006 and RBS in 2011 could cut access to free cash machines if replicated by other basic bank account providers.

Citing the banks to have adopted “beggar my neighbour” approach, the committee said, “The main purpose behind the development of the basic bank account initiative was to improve financial inclusion. It is particularly regrettable that this ‘beggar my neighbour’ approach may therefore lead to the closure or, in the case of cash machines not operated by banks, change to charging at existing free to use cash machines.”

Basic bank accounts are generally used by people who cannot meet banks’ minimum criteria to open a personal current account. Consumer groups argue that customers who do not dwell near an RBS or Lloyds cash machine would have to bear extra travelling costs to withdraw their cash, due to this limited cash withdrawal restriction.

In response to the committee’s report both RBS and Lloyds jumped to their defence claiming remain committed to offer free basic account for people who may otherwise struggle to access banking services.

Related:
Royal Bank of Scotland – Natwest systems failure fiasco continues to irk customers
RBS systems failure fiasco delays man’s release from prison