Government payments to become direct deposit in 2016: Implications for the unbanked
By Anita Jean
In 2016, the Government of Canada will move to a direct deposit of all government payments. There won't be any option but to open a bank account. Before this can happen Canadian's will need to get prepared.
Obtain Government Issued Photo Identification
To open a bank account, you need a picture ID. A health card does not qualify. Often the unbanked or under"banked do not have such Identification. Low income people may struggle with the costs associated (fees, pictures, and transportation) with obtaining a birth certificate and then photo identification cards.
Opening a Bank Account
According to CTV news, big banks agree to provide low"income seniors and youth with no"cost accounts. Under the new rules, which take effect on Jan. 15, 2015, banks will offer the financially vulnerable groups no"cost accounts with cheque"writing privileges, a minimum of 12 debit transactions per month, including at least two in"branch transactions. There will also be no extra charges for debit cards, preauthorized payment forms and monthly printed statements. Costs associated with insufficient funds are not included in this agreement. A hold on funds deposited may apply, which can create problems if you need to pay for items now.
Having access to no"fee accounts is a step to help protect vulnerable consumers, who are described by CBC news, as vulnerable "because small financial obstacles can cause them major challenges." To access funds, consumers have used pawnshops, cheque"cashers, rent"to"own operators and payday lenders to meet their financial needs at a great cost to their bottom line.
Debt and Liens
There are other elements that are at play for the unbanked. What can happen if an individual does not pay their debt? It typically goes into default and one of a few scenarios occurs. The debt may be sold to a collection agency. After paying the creditor, the collection agency tries to collect the money owed from the debtor. The creditor can register a lien on a bank account, securing the payment to who the money is owed, something that does not occur when using cash stores; the trade"off are the high fees. There are more unpleasant realities with liens. You do not need to be notified if a lien is placed on your account. A lien has to be discharged. The debt can follow you even though the balance has been paid in full. Liens travel widely through the banking system. The Canada Revenue Agency (CRA) is able to collect taxes as well as any public debt. If you owe them money, the CRA can access funds you hold in a bank account.
How can NorWest Community Health Centres help? We have programs that can help you to understand the steps to opening a bank account, budgeting, and meeting your financial goals. These sessions are posted on our website www.norwestchc.org and our facebook page www.facebook.com/NorWestCHC. For more information call Jodi at 626"7856.
Anita Jean is the Manager of Health and Social Programs at the NorWest Community Health Centres.
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