The Financial Ombudsman Service receives 1,000’s of complaints each year from customers who have had their bank accounts closed and are not happy with the response they have had from their banks.
The decisions the ombudsman comes to an an explanation as to to how they arrived at each decision are published on their website – and many decisions are very similar.
I thought it would be interesting to share with you a typical case and the outcome. It explains why the banks have the right to close accounts – and don’t have to tell you why.
Complaint
Mr O complains that Lloyds Bank PLC closed his bank account and didn’t explain why. He’s also unhappy about the service he received from Lloyds when he tried find out why his account had been closed. He wants Lloyds to reopen his account and pay him compensation.
Background
Mr O had a current account with Lloyds. In November 2018, Lloyds decided to close Mr O’s account. And it gave him two months’ notice to make alternative banking arrangements. Mr O complained to Lloyds and went into a branch to try and find out why Lloyds closed his account. Whilst in the branch Mr O says Lloyds told him that his account had been closed due to fraud concerns, which he found very upsetting as he says he’s done nothing wrong.
Mr O asked Lloyds to reconsider opening his account Lloyds said it had acted in accordance with the terms and conditions when it closed the account. And had made a commercial decision it no longer wanted Mr O as a customer. Lloyds accepted it had given Mr O misleading information when it told him his account had been closed due to fraud. And said this was mentioned to Mr O as just a possibility when branch staff tried to explain to him why accounts are sometimes closed.
Lloyds apologised and paid Mr O £75.00 compensation for any distress and inconvenience this had caused him, which Mr O accepted. Mr O was still unhappy about his account being closed. So, he brought him complaint to us.
An investigator looked at Mr O’s complaint. She said Lloyds had closed Mr O’s account in line with the terms and conditions of the account. Mr O disagreed. As no agreement could be reached the matter has come to me to decide.
My findings
I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, I’ve come to the same conclusions as the investigator for much the same reasons.
account closure
I appreciate that Mr O is upset that Lloyds closed his account and wants it reopened. But a bank is entitled to close an account with a customer just as a customer may close an account with a bank. But before a bank closes an account, it must do so in a way, which complies with the terms and conditions of the account.
The terms and conditions of the account – which both Lloyds Bank and Mr O had to comply with – say that it could close the account by giving Mr O two months’ notice. Lloyds Bank has done this. So, it’s entitled to close the account as it seems it’s already done. I know Mr O is frustrated that he hasn’t been given a proper explanation why his account was closed. And I appreciate that there was some confusion initially. But under the terms
and conditions Lloyds doesn’t have to give a reason for doing so – in the same way a customer doesn’t have to, should they no longer want to bank with them. So, I can’t say Lloyds has done anything wrong by not giving Mr O this information – as much as he’d like to know.
However, I can see that when Lloyds wrote to Mr O on 27 November 2018, it explained that it had closed his account as it considered him to be outside its risk appetite. So, I think its likely Mr O had some understanding about why his account was closed. This is a commercial decision on Lloyds’ part, which it is entitled to make, and not something this service usually gets involved with.
In summary, I recognise how strongly Mr O feels about what’s happened, and I don’t doubt it was a frustrating time. I realise Mr O will be disappointed by my decision, but overall, based on the evidence I’ve seen, I can’t say Lloyds have acted unreasonably and treated Mr O unfairly when it closed his account. So, I’m not going to ask them to do anything.
my final decision
My final decision is that Lloyds Bank PLC has made a fair and reasonable offer to settle this complaint. So, I won’t be asking it to do anything more.
Under the rules of the Financial Ombudsman Service.