TSB, HSBC, Barclays and Metro were highlighted as the worst offenders following analysis of FOS data by Which?

The consumer group found that some banks are not taking sufficient care to avoid closing down accounts of innocent customers, leaving them unable to access their money.

Banks can close customers’ accounts quickly and without reason in order to crackdown on fraud or money laundering. Account closures have been in the news recently following claims that Brexit campaigner Nigel Farage had his Coutts account closed by the bank without reason.

In the year 2022/23, the FOS received more than 1,380 complaints about the closure of current accounts, and upheld a quarter (25%) of these.

The most complained about banks

Of the 10 most complained about firms, TSB had the highest proportion of complaints upheld against it in four of the previous five years.

In 2018/19 and 2019/20, the FOS disagreed with its actions in more than half of complaints relating to Cifas markers, which identify potentially fraudulent activity and notify other firms including banks, credit providers, insurers and utility companies about potentially risky customers.

FOS data given to Which? found that in the year 2022/23, the FOS upheld two fifths (39%) of TSB customers’ cases, a third (33%) of HSBC customers and nearly a third (31%) of Barclays and Metro customers.

Between 2021 and 2022, the FOS found against the Royal Bank of Scotland in more than four in 10 (44%) of account closure complaints, with this figure falling to 27% in 2022/23.

Customers who successfully make a claim against their bank to the FOS rarely have their account reopened, but typically receive compensation and an apology.

Cifas markers

A consequence of suspected fraudulent activity occurring in a customers’ account is being a recipient of a marker against your name on the Cifas National Fraud Database.

Consumers with Cifas markers against their name can struggle to be accepted for new products and services, leaving them unable to get new bank accounts, mortgages or even phone contracts for the six-year life of the marker.

There are hundreds of thousands of Cifas markers in existence and those who receive them against their name are not told, unless they make a subject access request.

Being unaware could mean consumers end up making other applications for bank accounts or cards without success, which can negatively impact credit scores.

In order to assign a consumer with a Cifas marker, firms must be able to prove reasonable grounds for believing a fraud was committed or attempted and that evidence was clear, relevant and rigorous, such as reporting it to the police.

Yet the number of Cifas marker cases overturned by the FOS suggests this too often is not happening. Cifas told Which? that markers have prevented £1.6bn worth of fraud in 2022.

Banks urged to do better

Which? wants banks to make it clearer to customers what they need to do to challenge decisions about being denied service.

It said banks should review their decisions fairly, as consumers should not have to go to the trouble of pursuing complaints with the FOS.

Which? also called for better means of sharing data between banks and other industries, such as social media firms, so that fewer innocent customers are caught up in the fight against fraudsters.

Sam Richardson, deputy editor of Which? Money, said: “Having your bank account closed without warning can be an incredibly stressful experience – not least at a time when millions of households are struggling to pay the bills.

“Which? is concerned that some banks are wrongly closing customers’ accounts or handing them Cifas markers which can affect their ability to access other financial products for years.

“Which? recognises the importance of banks having the ability to close accounts quickly in the fightback against fraud, but wants to see better communication to customers on what they need to do to challenge decisions, and fairer reviews by banks of these decisions – rather than leaving customers to have to take their claim to the Ombudsman.”