Government clampdown on unfair bank account closures
Banks will be forced to explain and delay any move to close an account under new Government rules to “protect freedom of expression”.
The Government said it is stepping in to address fears that banks are terminating accounts because they disagree with someone’s political beliefs.
It comes after Brexit campaigner Nigel Farage hit the headlines in recent weeks after being ditched by Coutts and then claiming other banks rejected his application for a bank account.
As part of updated rules, the notice period to close an account will increase from the typical 60 days to 90 days – giving customers more time to challenge a decision through the Financial Ombudsman Service, or find a replacement bank.
Banks will also be required to spell out why they are terminating a bank account which should improve transparency and help customers in potentially overturning the decision.
The Government said the account closure changes are able to go ahead due to new powers giving Britain control of its financial rulebook following Brexit.
‘Balance the rights of bank and freedom of expression’
Economic Secretary to the Treasury, Andrew Griffith, said: “Freedom of speech is a cornerstone of our democracy, and it must be respected by all institutions.
“Banks occupy a privileged place in society, and it is right that we fairly balance the rights of banks to act in their commercial interest, with the right for everyone to express themselves freely.
“These changes will boost the rights of customers – providing real transparency, time to appeal and making it a much fairer playing field.”
The proposed changes follow a call for evidence launched in January, following PayPal’s temporary suspension of several accounts last year. It found that changes were needed to ensure the right balance is being struck between protecting customers, and providers’ rights to manage commercial risk.
However the rules require secondary legislation, which will be delivered through the Financial Services and Markets Act 2023, a framework for financial regulation in the UK.
This runs alongside separate plans to clarify in legislation the requirements for Politically Exposed Persons (PEPs), and a review into whether these are being applied proportionately by financial institutions.