Major British lenders including Natwest, HSBC, and Lloyds will face a regulatory overhaul on Tuesday as new rules around de-banking come into effect, aimed at providing stronger protections for customers when their accounts are closed.
New Rules Effective April 28
From April 28, banks and payment service providers must give customers at least 90 days' notice before terminating a payment service, an increase from the previous two-month requirement. This extended timeframe allows customers more opportunity to challenge decisions if they believe their account was wrongly closed. Additionally, banks must provide a clear written explanation to customers, enabling them to dispute the closure through the Financial Ombudsman Service.
What Is De-Banking?
De-banking refers to the practice where banks choose to close or refuse to open accounts for specific customers, often due to regulatory restrictions. This can affect both businesses and individuals.
High-Profile De-Banking Scandals
The issue has gained significant attention in recent years, most notably the case of Nigel Farage and Natwest. Farage's de-banking scandal led to the resignation of Natwest CEO Alison Rose after Coutts, a private bank within the Natwest group, identified the politician as a politically exposed person (PEP). PEPs are individuals who hold public office and are subject to additional due diligence by financial firms. Farage claimed his account was closed unfairly because the bank disagreed with his personal and political beliefs.
In the United States, political de-banking controversies have also intensified. In January, President Donald Trump criticized JP Morgan for allegedly discriminating against him by stopping services after the Capitol riots on January 6, calling the bank's actions incorrect and inappropriate.
Government Response
When announcing the new rules, the Labour Party stated that they would give customers more time to dispute closures and secure alternative banking arrangements, enhancing consumer protection in the financial sector.
