Following several high-profile “de-banking” cases, the UK Government has proposed a draft law that will force banks to take several steps to hopefully redress the balance back into the customer’s favour.
This blog will explore these proposed changes and discuss whether they will have the required effect.
Who can be ‘de-banked’?
Unfortunately, whilst recent cases of ‘de-banking’ have attracted headlines and attention, the experience is not limited to high-profile politicians in the UK.
Specifically, de-banking often affects both individuals and businesses who are (sometimes wrongly) classified as high risk and therefore considered as posing too many threats to the relevant banks.
Unfortunately, this approach, which is shared by most banks, may result in account closures, even for individuals and businesses that have been operating lawfully and in full compliance with all the relevant regulations.
This is obviously an incredibly frustrating and damaging event.
What are the proposals?
The proposals address some of the main complaints by those who have been de-banked – specifically the prompt timeframes which are at play and which favour the banks, and the lack of any reasons being given by the bank in a significant number of cases. Both of these factors often add up to providing an incredibly frustrating experience to the customer.
As such, the proposed changes will compel banks to give customers three months’ notice (up from two months’ at present) of a decision to close their account. To address situations where the bank wrongly avoids providing a reason, the rules will change to require banks to give a “sufficient detailed and specific explanation” to the customer. In addition, banks would not be allowed to insert clauses into customer contracts to circumnavigate the new requirements.
As is currently the case, there will always be situations (e.g. where there are anti-money laundering or terrorism financing safeguards), where banks are legitimately permitted to withhold the reasons for an account closure.
However, in situations where the banks have no justification to withhold reasons, but do so anyway, these rules should redress the balance back in the customer’s favour.
Time will tell whether the changes manage to ease the increasing number of wrongful “de-banking” cases experienced by customers.
NAVIGATING BANKING CHALLENGES
Bank 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 terrain 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 written blogs entitled “Why has my bank account been closed”, “Why has my business bank account been closed?” and “140,000 SMEs “de-banked” last year – why could I have been de-banked?”
HOW GHERSON CAN ASSIST
Gherson’s regulatory, white-collar and investigations team are highly experienced in providing advice on the steps one can take if a bank freezes or closes their account. This includes assisting clients with submitting a request under the data protection legislation, otherwise known as a Data Subject Access Request, to ascertain what information banks and other financial institutions may be holding on them and understand these institutions’ 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 X, Facebook or LinkedIn to stay-up-to-date.
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.
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