What to do if you are 'debanked' as complaints soar
Financial Ombudsman reports sharp rise in cases highlighted by Nigel Farage's experience with Coutts
Complaints about debanking have soared as worried customers turn to the industry watchdog for help.
Cases referred to the Financial Ombudsman Service (FOS) rose by 44%, the Commons' Treasury committee was told, with 3,858 new complaints about closed accounts received in the 12 months to the end of March.
The prevalence of debanking, where customers – in both a personal and business capacity – have their accounts closed, has led to "wider concerns" about how and when banks can "deny basic services to customers", said The Times.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
The rise in complaints has once again drawn attention to a "hot political topic" recently highlighted by Nigel Farage. The former Brexit Party leader launched a "furious public response" to the closing of his accounts at private bank Coutts last year, after his political views were deemed a factor in the bank's decision, said Bloomberg.
Why are people debanked?
There is a "long list" of circumstances where a bank may choose to close down a person's account. These can range from "instances or suspicions of fraud and money laundering" to an individual using their account to move cryptocurrency, which could "raise red flags" as the currency is unregulated, said The Telegraph.
However, there are also "random and confusing" reasons a bank could close your account; for example, if your account is "barely used".
Banks are also said to be "keeping an eye on so-called politically exposed people", whose public views come under scrutiny, the paper added. Financial institutions must "apply enhanced due diligence" to politically affiliated customers, due to concerns about "money laundering or accepting cash from illegal sources".
However, MPs have warned that some people are being "frozen out of the financial system" by banks and other providers due to "opinions or lifestyle or because of cost issues", rather than worries about potential financial crime, The Times said.
What to do if you've been debanked
With "thousands of everyday people" having their bank accounts closed each day, it is important to pay attention to what could happen next, said The Telegraph.
The matter can "cause confusion and financial problems" for those affected, "especially when they believe they haven't done anything wrong".
Indeed, the consequences for those who have been debanked can be wide-ranging. The measure "cuts off access to essential financial utilities that most law-abiding citizens and companies take for granted", said law firm Bindmans. This can include a person being unable to receive income, or struggling to process payments themselves.
If you lose access to your bank account, customers should contact their "bank's customer service team as soon as possible" to see if the matter can be resolved, said Interpolitan Money. If this fails, complaining to the Financial Ombudsman Service is the next best course of action.
What happens next?
Debanking may not be a huge risk to everyone. In fact, "tougher rules" are being brought in to "stamp out debanking" and protect both banks and customers, the government website confirmed in October 2023.
New legislation set to be placed before parliament will require banks to "give people 90 days' notice that their account will be shut – up from two months", said The Telegraph. In the vast majority of cases, the bank will also be required to tell their customer why the account is being closed "unless they are not legally allowed to".
These new rules – the Payment Services (Contract Terminations Amendment) Regulations 2024 – are expected to be approved by parliament before the summer and come into force "as soon as practicable thereafter".
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Rebekah Evans joined The Week as newsletter editor in 2023 and has written on subjects ranging from Ukraine and Afghanistan to fast fashion and "brotox". She started her career at Reach plc, where she cut her teeth on news, before pivoting into personal finance at the height of the pandemic and cost-of-living crisis. Social affairs is another of her passions, and she has interviewed people from across the world and from all walks of life. Rebekah completed an NCTJ with the Press Association and has written for publications including The Guardian, The Week magazine, the Press Association and local newspapers.
-
3 tips to lower your household bills
The Explainer Prices on everything from eggs to auto insurance to rent have increased — but there are ways to make your bills more manageable
By Becca Stanek, The Week US Published
-
Crossword: November 11, 2024
The Week's daily crossword
By The Week Staff Published
-
Sudoku hard: November 11, 2024
The Week's daily hard sudoku puzzle
By The Week Staff Published
-
3 tips to lower your household bills
The Explainer Prices on everything from eggs to auto insurance to rent have increased — but there are ways to make your bills more manageable
By Becca Stanek, The Week US Published
-
How to minimize capital gains tax on investments
The Explainer It can take a chunk out of your profits
By Becca Stanek, The Week US Published
-
How to handle financial anxiety ahead of the holiday season
The explainer Between travel, gifts and seasonal sales, it will be tempting to stretch your budget
By Becca Stanek, The Week US Published
-
What are high-deductible health insurance plans, and when do they make sense?
The Explainer Recent years have seen a growth of HDHPs, which offer lower monthly premiums but require customers to pay more out of pocket for care
By Becca Stanek, The Week US Published
-
What to know ahead of the next FAFSA rollout
The Explainer The FAFSA application process is no longer running the way it did before last year's big shakeup
By Becca Stanek, The Week US Published
-
4 risks to know about when using payment apps
The Explainer Payment apps like PayPal, Venmo, Cash App and Zelle are more popular than ever — but are they safe to use?
By Becca Stanek, The Week US Published
-
How to enjoy eating out without breaking your budget
The Explainer Save money by hitting happy hours, splitting the bill and putting a limit on drinks
By Becca Stanek, The Week US Published
-
When does it make sense to refinance your student loans?
The Explainer Refinancing involves moving your existing student loans into one new loan, which can streamline how many different payments you are juggling each month.
By Becca Stanek, The Week US Published