An update on the FCA's work in relation to account closures

On 4 September 2024, the FCA published an update on its work in the area of UK Payment Accounts Access and Closures.  The update follows on from the FCA's 2023 report which, amongst other things, concluded that payment account providers were not routinely closing customers' accounts "because of… political beliefs or views lawfully expressed".

• The FCA's September 2024 report sets out its findings in relation to follow-up work carried out after the 2023 report.  The FCA's core findings include:
• Firms were poor at making customers aware of Basic Bank Accounts (BBAs) and rejection rates for BBAs were impacted by differing customer journeys.  The FCA makes clear its expectation that firms should improve awareness of the availability of BBAs among customers and prospective customers, noting that some firms' websites do not signpost that BBAs are one of their current account options.
• The data retained by firms on the issue of account access "was limited or unclear" and there was significant variation on the data retained between firms.
  
  
• As in 2023, the FCA:

"did not see evidence of political beliefs or other views lawfully expressed being used as a rationale for account denial, suspension or termination".

"Reputational risk" is used in varying ways by different firms to deny or close customer accounts. The FCA noted that in some cases the "reputational risk" justification "did not seem to correlate with significant risks to the firm's standing" and its expectation is that the "reputational risk" justification for account closures is used only when there are reasonable and properly considered grounds.

The FCA has grappled with the tension between firms' money laundering obligations and consumers' interests vis-à-vis account access and has considered the views of certain sectors that have experienced difficulties accessing banking facilities (such as the pawnbroker and adult entertainment industries).  Helpfully, the FCA reiterated:

"other than with respect to BBAs, firms are entitled to refuse to onboard or retain a customer because they consider that it would be uneconomical for them to do so".

The FCA's update sets out that the FCA expects firms to review "relevant policies and procedures"; in relation to payment account access and closures through the Consumer Duty lens, and that firms should ensure that governance and oversight of account access decisions is in place in accordance with the Consumer Duty (with appropriate management information also being envisaged).  The FCA expects payment account providers to review their approach to account access and in terms of timings has provided that it:

"would expect firms to, in the coming months, be able to evidence that the matters about which we raise concerns in this report have already been addressed or will be addressed in a reasonable timeframe".

There has of course been a surge in "debanking" complaints in recent years, whether this is set to continue remains to be seen.  The outcomes the regulator is seeking to achieve are clear.  It wants to improve access to payment accounts for retail customers and it wants firms to improve their monitoring and oversight of payment account access issues.  These intended outcomes will not be surprising, though firms should be mindful that documentation arising from more sophisticated oversight regimes, may well be disclosable in the event of subsequent disputes.

The FCA's report sets out the full detail of its expectations of firms and can be found here.  The earlier 2023 report can be found here.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.