The number of complaints escalated to the industry ombudsman relating to bank accounts being frozen or closed has surged over the past year, data reveals.
In 2023/24, the Financial Ombudsman Service (FOS) received a total of 3,858 debanking complaints, up nearly 44% from the 2,683 recorded in the previous year.
These complaints include 3,153 general account closure cases for both individuals and SMEs, and 705 cases relating to ‘restricted account closure’. The latter refers to cases that involve financial crime and money laundering concerns, or where the complaint involves a politically exposed person (PEP).
Since 2020/21, the volume of complaints related to restricted account closures has almost trebled from the 243 cases recorded back then, the FOS revealed.
The FOS said the increase “could be due to changes in banks’ processes and behaviours, but is also likely to be a result of the media interest in this issue.”
Farage bank account fiasco
Brexit campaigner Nigel Farage was ditched by Coutts – part of the NatWest Group – last summer for reportedly not being wealthy enough.
Farage maintained the account closure was due to his political views and said he’d been rejected by other banks, suggesting it could happen to other ordinary savers too.
The fiasco sparked the Government to announce a clampdown on unfair bank account closures, requiring banks to explain and delay any move to shut an account to “protect freedom of expression”.
It later transpired that the bank noted a “reputational risk” in having Farage as a client, and flagged concerns over his political views.
The fiasco cost Alison Rose, CEO of NatWest Group, her job.
Uphold rates on the rise
Meanwhile, while complaints on debanking have risen, so have uphold rates. This has increased from 26% to 36% in favour of the complainant.
In a letter to the Treasury Committee written by Abby Thomas, chief executive of the FOS, she wrote: “Not all account closure cases relate to sensitive issues, like financial crime. Many cases we see stem from closures due to account inactivity, incomplete information in standard checks, or the bank’s own commercial reasons.”
She added: “Before a customer can bring their complaint to us, they first must complain to their bank and give the bank an opportunity to resolve it. We believe only a small proportion of the complaints customers raise with their banks are then referred to us, as the bank is typically able to resolve the issue to the customer’s satisfaction.”
Unrelated inquiry reveals debanking issues
The Treasury Committee originally launched an inquiry into financing for small and medium-sized businesses, adding that it didn’t expect debanking to be such an issue.
Indeed, in February, the committee highlighted that more than 140,000 business accounts had been closed by major banks.
Harriett Baldwin, chair of the Treasury Committee, said: “When we set out on our inquiry into financing for small and medium-sized businesses, we weren’t necessarily expecting debanking to emerge as a key issue. But as they say, you must go where the evidence takes you – and it’s clear there is evidence that some legally operating businesses are being unfairly debanked.
“Banks should be doing all they can to support small business in this country, not pulling the rug out from beneath them with little warning.
“I expect our report will have something to say about what we’ve uncovered.”
