UK unveils measures to curb de-banking

New draft legislation shows how banks and other firms will have to give customers more info when ending payment contracts. The reforms, which include lengthening the minimum notice period to 90 days, follow high-profile instances of de-banking.

Tighter rules for terminations

The government has released near-final regulations which would change the law for payment services and payment accounts. The amendments include:

• increasing the notice that providers will need to give when closing framework contracts from two months to 90 days,
• requiring payment service providers to give a sufficiently detailed and specific explanation so that the customer can understand why their contract is being terminated,
• clarifying that firms may not use their contracts to avoid the new termination requirements.

The changes will apply to framework contracts which are entered into on or after the day the regulations come into force. Exceptions apply, for example where the new rules conflict with other legal obligations.

Banks, e-money issuers and other payment service providers will need to change their processes to meet the new rules. They will also need to continue to bear in mind their Consumer Duty obligations in relation to existing contracts.

Chance to comment

HM Treasury invites technical comments on its drafting by 14 April 2024. It plans to lay the regulations before parliament in summer 2024.