The law does not include a universal right to a bank account for either persons or businesses. As long as they comply with the relevant rules and legislation, banks can decide whether to provide a payment account based on commercial and risk factors.
Firms are required, under FCA rules and legislation, to have effective risk
management frameworks and systems and controls. This includes effective
controls to manage financial crime and fraud risk, which may lead to customers being legitimately declined accounts or having their accounts suspended or terminated
There is no ‘universal service obligation’ (USO) on account providers, unlike in
some countries’ banking systems (eg France, Belgium) or some UK utilities (eg broadband, energy).
However, the 9 largest credit institutions must provide a basic bank account (BBA) to eligible UK personal customers who would not otherwise be able to get an account. This comes without fees, charges or an overdraft. There is no equivalent requirement for businesses, including charities or campaign groups.
The banks that offer a basic bank account (although many don’t advertise the fact) are (Click to open their basic bank account application page)
- Nationwide
- Halifax
- Barclays
- Co-op
- Bank of Scotland
- Metro
- Lloyds
- Nat West
- Royal Bank of Scotland
- Santander
- TSB
- HSBC
- Virgin money
- Bank of Ireland
…but bear in mind these banks don’t HAVE to accept your application – banks will usually refuse your application if you are suspected (rightly or wrongly) of money laundering or fraud.
If you are refused by the above banks click HERE for a list of banks more likely to accept you
Where a bank refuses an application for a BBA, it must tell the customer the reason for this in writing and without delay, where it can lawfully do so. In some cases, such as in cases of suspected financial crimes, the bank will have a legal obligation to limit the amount of information it can give the consumer about the reason for the refusal, to avoid jeopardising any investigation into unlawful conduct by the consumer.
The Payment Accounts Regulations 2015 require credit institutions, but not payments firms, not to deny a UK consumer access to a personal payment account on the basis of a range of protected characteristics, including lawful political views.
From 31 July 2023, financial services firms must also meet the requirements of the Consumer Duty (‘the Duty’) by putting retail customers’ (including smaller businesses and charities) needs first and delivering good outcomes for them.
Under financial crime requirements, providers will decline or close an account in some circumstances, and under immigration laws they must do so in certain circumstances. But where, for example, a firm has suspicions of financial crime, they should investigate this in a reasonable timeframe and not unnecessarily deny people access to their accounts.
If fraud is suspected your details may be passed to CIFAS, SIRA and/or National Hunter. These are databases that share information about suspect customers.
- Check to see if you have a CIFAS marker against you HERE
- Find out what information SIRA hold about you HERE
- Find out what information National Hunter hold about you HERE
In some instances, the way banks have responded to money laundering and other financial crime risks has led to problems for legitimate customers accessing accounts or other banking services. This is often called ‘de-risking’ (or sometimes ‘de-banking’).
In 2014, The Financial Action Task Force defined de-risking as ‘the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, [money laundering] risk in line with FATF’s risk-based approach’
You have the right to complain to your bank and for that complaint to be looked into in a timely manner.
If a customer is not satisfied by a firm’s response, they can refer their complaint to the Ombudsman Service, who will consider the complaint independently and reach a decision based on what is fair and reasonable in all the circumstances of the case. The Ombudsman Service has a dedicated team that resolves account closure complaints and have published guidance for firms on how they should handle such complaints. (Remember however, the banks DO have the right to terminate your account and will usually not tell you the reason why.)
If you do make a complaint to your bank the rules require banks to send the complainant a ‘final response’ letter within 8 weeks of receiving the complaint. The response must either uphold the complaint and offer redress or other appropriate remedial action or reject the complaint and give reasons for doing so. FCA guidance makes clear that firms should aim to resolve complaints at the earliest possible opportunity, minimising the number of unresolved complaints which need to be referred to the Ombudsman Service, and that almost all complaints should be substantively addressed by the bank within 8 weeks.
Unless there are exceptional circumstances, the complainant has 6 months from the date of the final response to refer their complaint to the Ombudsman Service. Where there are exceptional circumstances, for example a complainant has been or is incapacitated, they may be able to refer a complaint after the 6 months, but this will depend on the individual circumstances of each case
It is against the law for a bank, when providing banking services, to discriminate against a person because of a ‘protected characteristic’. This includes discriminating against business customers, charities, and micro-enterprises, for example based on the businesses’ employees, purpose, or the specific groups of customers that they serve.
Discrimination in this context may come in several forms, including:
- Direct discrimination – treating someone with a protected characteristic less
favourably than others. For example, a bank refusing to accept disability benefit letters as proof of address while accepting letters from employers. - Indirect discrimination – putting rules or arrangements in place that apply to
everyone, but that put someone with a protected characteristic at an unfair
disadvantage. For example, banks refusing to provide accounts to consumers with a characteristic not explicitly mentioned in the permissible reasons for refusal, such as consumers being over a certain age limit.
A bank may terminate an account by giving at least 2 months’ notice (provided the contract sets out this termination right for the bank. The government is proposing to change this notice period to 90 days
However, a bank may terminate giving less or no notice in limited circumstances where the bank is entitled, according to the general law of contract, to treat the contract as unenforceable, void or discharged.
A bank must communicate a termination notice to a customer and the notice must be in easily understandable language and in a clear and comprehensible form
Before suspending (different from closing) an account, the bank must inform the customer of its intentions and reasons for doing so before or, if not possible, immediately after. The exception to this is if giving the customers this information would compromise reasonable security measures or would be unlawful. For example, if doing so would constitute ‘tipping off’ under AML legislation. The firm is required to end the suspension as soon as practicable after the reasons for suspension cease to apply
If a bank considers that it is necessary to suspend an account, the FCA expect it to carry out any investigation in a reasonable time and not deny customers access to their money unnecessarily. Banks should also, where possible, communicate with customers, acknowledging that they may need to take care to avoid alerting individuals in a way that could undermine further action to be taken under the Proceeds of Crime Act. This means there may be
some circumstances where it is difficult for a bank to explain to a customer the reason for imposing restrictions on an account.
From 31st July 2024 banks have a new legal duty to the consumer.
Under the Duty, banks must avoid causing foreseeable harm to retail customers. The Duty does not prevent a bank from withdrawing
a product or service. However, a bank can cause foreseeable harm or frustrate the objectives of its customers in the way it does this. For example, if a bank withdrew a product or service without considering the effect on the affected consumers, this could cause foreseeable harm
Therefore, where a bank is planning to close a customer’s account, it should consider whether this could lead to foreseeable harm for the customer and take steps to manage the impact of the potential harm. This could mean providing support for the customer to find a suitable alternative and ensuring that the firm communicates the support available in a timely, clear, and sensitive manner
The Duty requires banks to support retail customers in pursuing their financial
objectives. Where a bank refuses to open an account for a customer, or terminates their account, it should still consider whether there is information or support it could provide to help the customer pursue their financial objectives. This could include, where appropriate, explaining why or how
these decisions may have been reached, alternative options that might be available to the customer, and how the customer can access further support from the bank and other parties. For example, a bank could signpost a customer to third parties that provide reliable information, relevant to their needs (such as this website)
Under the FCA’s vulnerable customer guidance, banks should consider the needs of customers in vulnerable circumstances at each stage of designing their products and services. This includes taking them into account if they are considering changing a product or service. The FCA are clear that banks should communicate any changes, including withdrawing a product or service, in a clear and sensitive way