De-banking in the UK: An update

FCA update report on payment accounts and closures

In September 2023, the FCA published a report entitled “UK Payment Accounts: access and closures”, which detailed findings from a review of issues relating to payment account access for individuals and corporations.

The FCA conducted follow-up work with respect to several areas.  In September 2024, the results of this follow-up work were published in a report titled “UK Payment Accounts Access and Closures: Update”. Unfortunately, this highlighted continued concerns over account closure and termination processes.

What reasons for closure did the FCA Update find?

Reasons for account closures and denials generally included:

• Non-specific financial crime concerns
• Reputational risk issues
• Difficulties for customers in vulnerable circumstances
• Customers struggling to meet due diligence requirements

What concerns did the FCA raise?

• Basic Bank Account customer journeys varied, and firms were poor at making customers aware of basic bank accounts.

• Data on account access was limited or unclear.  Many firms identified discrepancies in their data on the reasons for their account denials and terminations.

• The FCA did not see any evidence of political beliefs or other views lawfully expressed being used as a rationale for account denial.

• ‘Reputational risk’ is used in varying ways by different firms to deny or close accounts.  Sometimes this did not seem to correlate with significant risks to the firm’s standing, but other concerns instead.  In other cases, the actual rationale was not clear, raising concern about the firms record keeping.  There was also a lack of consistency within firms regarding instances when “reputational risk” should be a relevant factor in an account closure decision.

Next steps for firms

• The FCA expects payment account providers, including firms it did not engage with as part of this review, to take account of the expectations outlined in the report and consider how this might impact their businesses.
• The FCA expects firms to review their customer journeys for onboarding and offboarding, as well as the associated policies and procedures, through the lens of the Consumer Duty. Following this review, the FCA would expect firms to be able to evidence how they have made sure that the relevant customer journeys and policies and procedures are consistent with the Consumer Duty’s cross-cutting rules and are delivering good outcomes.

Next steps for the FCA

• Changes to Financial Lives Survey: In its 2023 report, the FCA committed to expanding and refining the questions in its Financial Lives Survey (FLS) about consumers without payment accounts, and to do further work to understand some of the underlying and interrelated issues about unbanked consumers identified in its FLS data.
• New FLS questions: the FCA has added new questions to the FLS to help understand the perspectives of ‘unbanked’ consumers and expects to have initial findings from this soon.
• Further work to help unbanked consumers: The FCA has asked firms to continue working on resolving account access difficulties for these consumers, but can take further action if it later determines that changes made have been ineffective or inadequate.

• Engagement with firms: The FCA welcomes engagement with firms regarding how they might effect changes in response to the report and what specific implications these changes are likely to have for them.

How can you minimise your chances of becoming de-banked?

There will always be situations (e.g. where there are anti-money laundering or terrorism financing safeguards) where banks are legitimately able to close accounts and also withhold the reasons for an account closure.

This was also recognised in a recent February 2024 report by the All Party Parliamentary Group on Fair Business Banking  titled “De-Banking Report”, which we examined in a previous blog.

However, as we have previously argued, the approach to providing access to an adequate bank account and banking facilities should be radically reconsidered such that it is akin to a fundamental right, rather than something that can be offered (and taken away!) at the whim of the banks.

It is, of course, in the public interest and beyond sensible argument that banks should be able to close a customer’s account if the bank has financial crime concerns.

However, so long as banks remain able to close a customer’s account for vague reasons, such as reputational risk, and even in some circumstances costs, there will always be situations which are unjust for the customer.

There are some strategies that can be applied to reduce the risk of being de-banked, including:

1. Keeping detailed information on source of funds to hand, including official documentation, where possible, to provide to any financial institution if requested.

• Responding to any request for documentation from the relevant bank (taking advice if necessary).

How can Gherson help if the bank closes my account?

In the unfortunate event that the bank closes a personal or business account, there are various steps that can be taken to try to resolve the situation:

1. Pursuing a complaint with the bank to find out the bank’s reasoning for closing the account.

• Pursuing a complaint with the financial ombudsman service (however, note that this route will not be appropriate in all circumstances).

• Asking for legal advice in the event that you have exhausted any and all internal processes specific to your bank; and

• Pursuing a Data Subject Access Request to learn what information a financial institution holds on the business (although in the case of a business this will be limited to information about individuals (e.g. company directors) rather than the business itself).

We have previously outlined steps that individuals who feel that they have been de-banked can take.  This includes making a formal complaint to the relevant bank, accompanied by a Data Subject Access Request (“DSAR”).

We have previously written about how account closures are not limited to political figures in the UK, and affect many thousands of lawful individual and business customers every year.  These cases have exposed the difficult balance many financial institutions and their individual and business customers must navigate to gain and maintain access to basic banking services. 

To assist those whose accounts have been closed, Gherson’s financial crime, investigations and regulatory team have previously written these related blogs:

“Why has my bank account been closed”

“Why has my business bank account been closed?”

“140,000 SMEs “de-banked” last year – why could I have been de-banked?”

“What are the next steps if a bank does not uphold my complaint”

HOW GHERSON CAN ASSIST

Gherson’s regulatory, white-collar and investigations team are highly experienced in providing assistance on what you can do if your bank freezes or closes your account.  This includes assisting you in submitting a request under data protection legislation, otherwise known as a Data Subject Access Request, to ascertain what information banks and other financial institutions may be holding on you and their decision making, and then analysing the response and assisting with any appropriate challenge.

If you have any questions arising from this blog, please do not hesitate to contact us for advice; send us an email at enquiries@gherson.co.uk or, alternatively, follow us on Twitter, Facebook, Instagram, or LinkedIn to stay up to date with the latest developments.

The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice.  Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position.  Gherson accepts no responsibility for loss which may arise from accessing or reliance on information contained in this blog.  For formal advice on the current law please do not hesitate to contact Gherson.  Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Gherson.

©Gherson 2024

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