Banks to make major changes to account closure rules – and it’s good news for thousands of households
BANKERS will be forced to make a major change to account closure rules and that is good news for thousands of households.
Lenders will have to give account holders three months’ notice before closing their accounts under the new plans, the Treasury Department has confirmed.
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They will also have to explain and delay any decision to close accounts under new rules designed to protect free speech.
Banks will be forced to be more explicit in their arguments and more forthright when making those kinds of decisions.
It comes after Coutts’ closed an account with Nigel Farage, the former leader of the UK Independence Party.
The closure has led to a closer examination of how the process plays out and what can be tweaked.
“Freedom of expression is the cornerstone of our democracy and it must be respected by all organisations,” said Andrew Griffith, economic secretary for the Treasury Department.
“Banks occupy a privileged place in society, and it is true that we must strike a fair balance between the right of banks to act in their commercial interests, with the right to let people freely by self-expression.
“These changes will promote customer rights, bring real transparency, time to complain, and make it a much more level playing field.”
The customer can still appeal the lender’s decision to close the account.
The fixed three-month notice period and greater transparency of the bank’s decision should in theory make the appeals process easier.
According to reports, there will still be a few reasons why banks might close accounts, such as criminal activity and national security concerns.
The Financial Conduct Authority (FCA) will need to change its rules to include the changes – but the process is not expected to take too long.
These changes will not deprive the bank of its right to close the accounts of those deemed a political or reputational risk.
As it stands, banks should allow customers 30 days to make alternative banking arrangements before transferring their accounts.
Lenders will suspend accounts if they detect any “suspicious activity”.
This may include sending or receiving large amounts of money for unknown reasons.
It includes any transactions that don’t fit a typical user’s spending pattern.
If a bank suspects a customer has been the victim of a scam – when large sums of money are sent – the bank closes the account.
Recent data from which? found that the Financial Ombudsman Service (FOS) received more than 1,380 complaints about current account closures in 2022-2023, of which a quarter were upheld.
The Sun has previously spoken to a number of disgruntled customers who had their accounts suddenly locked without warning.
Earlier this year, a woman was left in tears when the bank locked her account for weeks after receiving a large sum of money from a family member.
Last September, a mother of four was unable to buy food for her children after her bank account was suddenly locked without explanation.
And a few years ago, a man’s bank account was closed without warning and he went through “absolute hell” reordering his Universal Credit payments. .
The new measures, if they are implemented, could lead to fewer customers having their accounts closed in this way.
It can also mean that it is easier and clearer to appeal the decision.
Meanwhile, another 44 banks will close by the end of this year and through 2024.
Plus, Britons could miss out on cash if they don’t switch savings providers – we explain why.
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