Banks will be forced to explain and delay any decision to close an account under new rules, protecting freedom of expression.
The government has stepped in to address fears that banks are terminating accounts because they disagree with someone’s political beliefs.
The changes will increase the notice period 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 – boosting transparency for customers and aiding their efforts to overturn decisions.
The changes announced today (20 July) can only be made due to new powers in the Financial Services and Markets Act 2023, which give Britain control of its financial rulebook following Brexit.
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.
They require secondary legislation, which will be delivered through the powers granted in the Financial Services and Markets Act 2023, as part of the government’s programme in building a Smarter Regulatory Framework for UK financial services.
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. These steps were commissioned by Parliament last month as part of the Financial Services and Markets Act 2023; and the FCA will set out how they intend to conduct the review by the end of September.