Student Finance Overview
If you buy Fairtrade goods, believe in human rights, or are concerned about climate change -
- put your money where your mouth is and open an ethical bank account too.
Financial institutions make all sorts of offers to get students through their doors, from discounts to vouchers to bags of freebies. But these short-term gestures can mask long-term issues.
How would you feel if your money was being used to prop up oppressive regimes, test cosmetics on animals or damage the environment?
What are the issues?
Before you open a new student bank account, or if you want to find out about your current bank’s green and ethical credentials, you should consider the following:
Lending
Banks don't just lend money to current account-holding customers, they also lend to large corporations, public institutions and even governments. Would you approve if your bank was lending money to a company with a poor track record on human rights or one manufacturing arms for use in war zones?
Climate Change and Environment
Financial institutions have an impact in these areas, not just in terms of who they lend to or invest in, but how they run their own operations. It is important to find out what your bank or insurance provider is doing to improve its environmental performance as a business: have they pledged to go carbon neutral for example? Or do they offer any green products to their customers?
Equal Opportunities
A lot of people believe that equal opportunity in the work place is now the norm, but there is still a massive pay gap between men and women doing the same jobs across most industries, including finance. Also the number of women in high level positions is still significantly lower. Not only that but some companies’ equal opportunities policies don’t take other key issues like sexuality and disability into consideration.
Financial Exclusion
There are an estimated two million adults in the UK without even the most basic bank account. Is your bank doing anything to address this situation?
For more details see our Financial Exclusion section.
Responsible Credit
Does your bank, credit card provider or insurance company take care to appropriately target and market its products? Does it offer assistance to customers in financial difficulty? Some credit card providers may not treat their customers responsibly – issuing cards to people who’ll struggle to make their repayments and not offering help to those who do fall behind.
What are the ethical options?
There are a few banks, building societies and insurance companies with well-recognised green and ethical credentials. The examples listed below for banking and saving also scored the highest marks on ethical lending in our research:
Banking
- The Co-operative Bank: this institution provides student banking, insurance and credit cards facilities and has an ethical lending policy that extends across all its business operations.
- Smile: this internet arm of the Co-operative Bank and also offers student accounts.
Saving
- Triodos: this bank offers green and ethical savings accounts. Its commercial lending is primary to green businesses.
- Ecology: this mutual building society offers a range of green savings accounts and mortgage options and its commercial lending is mainly to small, green businesses.
Insurance
- Co-operative Insurance
Insurance type: home, motor, life and health
This company offers a wide range of insurance products and has an extensive ethical engagement policy governing who it will provide cover to. - Climate Sure
Insurance type: travel
Climate Sure calculates the CO2 produced by flying overseas and pays for it to be 'offset' by funding sustainable energy projects. - Green Insurance Company
Insurance type: motor
This provider aims to offset your car's carbon emissions and offers discounts on greener cars/lower mileage. - Naturesave
Insurance types: home, travel, personal accident and illness insurance
This company puts 10% of its personal insurance premiums in a fund (Naturesave Trust) to benefit environmental and conservation projects. It also offers a free environmental performance review for commercial clients and aims to use suppliers that support sustainable business practices.
Credit Cards
Before signing up to a card you should check out the ethical credentials of its provider. Visit our credit card section for more information.
Your next steps
See our Next Steps Guide - Student Finance for information on finding the best green and ethical service provider for you, how to switch accounts and how contact your bank or insurance company about their policies.
Student Finance Search
Bank of Scotland
Green/Ethical Products
- Basic Bank Account (Easycash)
- Secured mortgage lending in deprived areas
- Community banking current account and lending
Ethical Lending or Insurance
We found no public data on having an ethical lending policy in place, although the parent company, HBOS, identified the need to implement such a policy in 2004, i.e. 'Future challenges for HBOS include widening the scope of its corporate responsibility to start dealing with issues such as third world poverty or lending to companies involved in supporting the arms trade' as in Corporate Responsibility report 2004.
Responsible Lending
1. Credit Lending
Bank of Scotland offers LTV (loan-to-value) mortgage rates of 60% to 95% depending on mortgage product. The 95% rate does not compare favourably with the FSA’s Turner Review suggestion of a maximum LTV of 90%, i.e. the borrower should have at least a 10% deposit.
The LTI (loan-to-income) rate is not specified.
With regard to unsecured loans the bank uses credit scoring based on information submitted by the applicant and provided by credit reference agencies to assess the borrower’s ability to make repayments.
On the subject of credit limits, the bank says that it is happy to review a customer’s credit limit based on an assessment of their ability to pay the new amount. Additionally, the customer must have held the card for at least six months. However, the bank says that is may increase a customer’s credit limit automatically from ‘time to time’ and that the customer will be advised in writing when this occurs. The customer can cancel the credit extension by calling customer service.
2. Debt Warning
The bank suggests customers look out for ‘warning signs’ of possible problems with their finances such as only making the minimum payment on credit cards, borrowing cash from family and friends, borrowing or using credit cards to pay off debts, using a credit card to pay for utilities and groceries but not clearing the monthly balance or being declined credit.
It also highlights the negative effect missing credit card payments may have on a customer’s credit rating.
The bank links to an interactive budget calculator provided by the FSA which calculates the percentage of monthly incomings spent in different areas – household, leisure etc. Neither warnings nor advice are provided alongside the end calculations. The bank does not refer customers to the FSA’s Debt Test which is designed to help them find out whether they have, or are likely to have, problems with borrowing.
It uses a generic warning with regard to mortgages: ‘Your home may be repossessed if you do not keep up repayments on your mortgage’.
3. Debt Management and Advice
The bank does not provide a clear set of steps with regard to the repossession process, nor does it outline how it may help customers restructure their mortgage payments.
It does offer payment holidays ‘for a period of between one and six months over the life of the mortgage’ and for customers you have had their mortgage for at least three months and who are up to date on their payments. Interest is still charged interest on the mortgage balance during this period. Payment holidays are not available on unsecured loans under £25K.
Additionally, the bank, through its Money Management Team, suggests customers in financial difficulty consider a number of external options, including:
- Temporary Repayment Plans – the customer’s budget is calculated and the money they can afford to pay creditors is divided up fairly between them, based on how much is owed to them
- Individual Voluntary Arrangement (IVA) - this is an alternative to bankruptcy and is a formal arrangement between the customer and their creditors to pay an agreed amount of the debts over a set period. An Insolvency Practitioner is required to set this up and they usually charge a fee
- Bankruptcy – this comes with a warning as to the seriousness of choosing this option and with a recommendation to seek professional advice
- Trust Deeds – these apply to customers in Scotland and are a way of setting up a monthly repayment schedule based on what a customer can afford to pay. A deed will typically last for three years, after which any remaining debts are normally written off. The potential damage to the customer’s credit rating in choosing this option is highlighted
No evidence was found that the bank offers re-housing advice or liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements with mortgage customers facing repossession.
Financial Exclusion
The bank offers a basic bank account to low income customers and offers secured mortgage lending in deprived areas.
In terms of access provisions, Bank of Scotland offers documents in large print, Braille, and on audio cassette. Other provisions include Typetalk, wheelchair access, low-level counters and accessibility measures on its website. The bank also runs some mobile units to provide a banking service to underserved communities.
Environment
The HBOS Group’s environmental policy addresses the key issues of energy efficiency and waste management and shows a commitment to continued improvement of its environmental performance.
Carbon Neutral
The HBOS Group’s business operations became carbon neutral in 2007.
Equal Opportunities
The Group’s policy addresses the key areas of gender, race, disability and sexuality.
Women on the Board
25% of the HBOS board is made up of women according to 2007 figures.
Voluntary Standards & Initiatives
Parent company, HBOS, is a signatory/member of:
Bank of Scotland
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Health, Pet)
- Student Current Account
Bank of Scotland
Bank of Scotland
Customer Relations
PO Box 29112
Dunfermline
KY11 2ZX
