NEW rules coming into effect from next spring will force banks to give customers extended notice periods before closing their accounts.
Starting in April 2026, banks will be required to provide current account holders with at least 90 days’ notice before shutting their accounts.
The move comes nearly two years after Nigel Farage’s very public spat with Coutts, a NatWest subsidiary, ignited a fierce debate about the rights of banking customers.
The controversy led to the resignation of NatWest CEO Alison Rose, who had claimed that the closure of the former UKIP leader’s account was due to commercial considerations.
However, Farage later uncovered, through a subject access request submitted to the bank, that his account had been closed due to his political beliefs.
Following this revelation, the then-Chancellor, Jeremy Hunt, proposed legislation to mandate longer notice periods for customers whose accounts were being closed.
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However, the legislation was never enacted before Labour’s election victory.
Now, the Labour-led Treasury plans to consult on similar regulations, which are expected to take effect next April.
Under the proposed regulations, banks will be obligated to provide customers with a written explanation for account closures, along with a minimum of 90 days’ notice.
This measure offers a lifeline to those who feel they have been unfairly targeted, enabling them to challenge the decision – potentially through the Financial Ombudsman Service.
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Regardless of Farage’s dispute bringing this issue into the spotlight, you don’t need to express strong opinions to find yourself dropped by your bank.
Data from the Financial Conduct Authority (FCA), obtained by The Telegraph, revealed that half a million accounts were closed during the 2023-24 financial year – the highest number in a decade.
A bank can shut your account for a number of reasons, for example if you don’t meet the terms and conditions like paying a minimum deposit.
It could also axe your service if you make a large number of high value deposits.
Sun Money has previously spoken to a number of readers who have suffered dire consequences when their accounts were cancelled without warning.
Although current Financial Conduct Authority (FCA) regulations require banks to provide just 60 days’ notice, many, including NatWest, have already voluntarily extended this period to 90 days.
Why might my account be closed?
Your bank could decide to dump you simply because you don’t meet its terms and conditions.
For example, when you signed up you might have agreed to pay in a certain amount each month or to set up several direct debits.
In this type of situation, the bank would need to give you at least 30 days’ notice so you can move your money elsewhere.
Which? Money editor Jenny Ross says: “Under some circumstances, banks are allowed to close accounts without notice and without providing a reason.
“This includes suspected fraudulent use of the account.”
Your bank could put an immediate freeze on your account if it sees spending or large transfers in or out that seem suspicious.
It might block money from leaving your account to help protect you if it’s worried that you’ve fallen victim to fraudsters.
Similarly, if a large amount of money is received, it might suspect you’ve been caught up in a money-laundering operation.
Fraudsters can manipulate customers into becoming so-called money mules.
This means that they might be helping crooks to move around cash earned from crime without even knowing it.
Sometimes victims believe they are helping out a friend or that they are being paid for a job that seems legitimate.
After putting a temporary freeze on your account, the bank will then investigate more thoroughly.
If it’s still unsatisfied after this, it can permanently close your account.
Banks don’t have to explain why they’re closing your account
UNDER current rules, banks don’t always have to explain their reasons.
Guidelines for banks say: “You don’t have to explain to a customer why you’ve closed their account, but it can be helpful to do so.”
The government wants to bring in new rules forcing banks to give account holders three months’ notice before shutting their accounts and provide an explanation.
But even then this wouldn’t apply where the bank suspects fraud.
That said, it is still worthwhile to ask your bank to explain its decision, as it has an obligation to treat you fairly.
You can write to them saying you wish to make a “subject access request” to find out more information about why you’ve been ditched.
What should you do if your account is closed?
It’s important to try to find out if there are any problems that might have triggered the closure.
For example, it might be that crooks have stolen your identity and applied for loans in your name.
Start by running a free credit check through a service like moneysavingexpert.com’s Credit Club, Credit Karma or Clearscore.
It’s best to try all three if you’re concerned in order to cover the three main credit agencies that keep records of your financial dealings.
The reports should help you spot if there are any accounts that you don’t recognise.
If you’re worried that your account might have been flagged as suspicious, you can also apply to two fraud-fighting organisations — Cifas and National Hunter – to find out what information they hold on you.
When you write, say that you would like to make a “subject access request”.
If you’re not happy with the way your bank has treated you, make a complaint.
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After eight weeks, if the bank doesn’t respond or if you’re not satisfied, you can take your complaint to the Financial Ombudsman Service (FOS) for free.
If the FOS agrees that you’ve been treated unfairly and you can prove that you have lost out financially as a result, you might be able to get compensation.
