By Catherine McGrath*
Like most Kiwis, I use my bank account and debit card numerous times each week, for everything from buying food to paying bills.
Without a bank account, many of my day-to-day payments would be extremely difficult – if not impossible. You need a bank account to be paid, receive a benefit, or pay your rent.
And while having a bank account is something I take for granted, many New Zealanders aren’t so lucky.
People in bankruptcy were one of the many marginalised groups identified at high risk of having their accounts closed by banks, or being refused a new account, once they were declared bankrupt.
We know Kiwis can be embarrassed to ask for help. Can you imagine then, how difficult it must be to have to explain that you’re bankrupt?
Since we released that report, we’ve been working through its recommendations, one of which was to give greater flexibility and case-by-case consideration for customers who are bankrupt.
We’ve recently updated our policies so that people going through bankruptcy can keep their transactional accounts open, as well as retain their debit cards.
A 2022 survey undertaken by the Insolvency and Trustee Service found 49% of respondents faced account closures after being declared bankrupt, while 22% said they had difficulty in finding a new bank or credit union.
This might seem like a small change, but we know it can make a real difference for those experiencing tough times.
I acknowledge there will be a range of views on people who find themselves in bankruptcy, but in most cases it is people who have fallen on hard times. Ensuring they can access a bank account is one of the basic tools that will help them get back on their feet.
In a case study from the Access to Banking Report, one woman’s bank closed her accounts after she entered the insolvency process. Subsequently, she didn’t have an account for her benefit to be paid into and struggled to find a way to pay her bills and rent. She approached every bank in her small town to ask if she could open an account, but each time was told she couldn’t due to her insolvency.
Eventually, with her young baby in tow, the woman travelled three hours to another town where a smaller bank there agreed to open an account for her. While she was relieved to have an account and be able to resume her day-to-day banking, the experience added additional pressure to what was already a stressful time.
I know there will be many more stories like this, which is why it’s significant that our teams can now proactively let bankrupt customers know that we’re not going to close their transactional accounts or take their debit cards away.
I’ve already had feedback from our people that they really appreciate being able to tell our customers that we don’t just see them as a bankrupt; that we genuinely care about what our customers are going through and that we’re here to support them get back on their feet. We’re really clear that we want to exit the debt, not the customer.
The update in our bankruptcy policy is the latest initiative in Westpac’s efforts to make banking more inclusive for all New Zealanders.
We’re already opening accounts for prisoners who are nearing their release date. Having a bank account is a key tool in enabling someone to successfully reintegrate into society. We’ve also been working with Oranga Tamariki and advocacy organisation VOYCE - Whakarongo Mai to make it simpler for young people in state care to get a bank account and access financial education, to help avoid some of the problems identified in the report.
While these initiatives are steps on the journey, I know there’s much more to be done. Both financial institutions and the Government have a role to play in ensuring that all New Zealanders, including the most vulnerable in our society, are able to access everyday banking services.
*Catherine McGrath is Westpac New Zealand's Chief Executive Officer.