UK strengthens protections against debanking

The UK government is pressing ahead with new rules to prevent unfair debanking – a move that will reshape how payment service providers (PSPs) manage account closures.

The Payment Services and Payments Accounts (Contract Termination) (Amendment) Regulations 2025 (Regulations) are awaiting parliamentary approval which is expected over the coming months. The Regulations build on a government policy statement from October 2023, the publication of draft legislation and accompanying policy note and work undertaken by the Financial Conduct Authority (FCA) to publish its findings relating to the issue.

Background

The Regulations are designed to improve transparency and greater protection for users of payment services against the termination of their payment services without sufficient notice or explanation.

These Regulations derive from several high profile account closures and concerns around financial exclusion. The government wants to ensure that customers are not offboarded without proper explanation, while ensuring that firms can legitimately manage financial crime and compliance risks.

Who do the Regulations apply to?

The Regulations will not just apply to banks providing current accounts but to any PSPs who provide payment services through a framework contract within the scope of Regulation 51 of the Payment Services Regulations 2017. The Regulations will apply to PSPs providing e-money accounts and merchant acquiring services.

PSPs should note that the Regulations will permit them to agree that the new termination requirements are not applicable to their contracts with corporate customer – on an opt-out basis.

What are the key changes?

The key changes are as follows:

• PSPs must give 90 days’ notice instead of two months’ notice before the termination of the contract takes effect.
• Termination notices must be in writing and include clear reasons for the decision to terminate the contract which enable the customer to understand why the contract is being terminated.
• The customer must be told how a complaint against the termination may be made against the PSP and any right they have to complain to the Financial Ombudsman Service.

Crucially, there are exceptions to these requirements. For example, no termination notice is required if the PSP is unable to apply customer due diligence measures under anti-money laundering legislation or if there are reasonable grounds to suspect their services are being or will be used in connection with a serious crime.

What this means for PSPs?

PSPs will need to:

• review termination policies to ensure these address the Regulations;
• review their products, contractual frameworks and customer base to ascertain which products / contracts / customers are in scope for the Regulations;
• ensure personnel are trained, and systems and procedures are updated, in a manner that ensures the 90-day notice is given properly (when required) and that reasons for terminating are sufficiently communicated and clear;
• consider whether a repapering exercise is required to accommodate the new Regulations for both existing and new framework contracts whether that happens now or in April 2026 (see section below); and
• ensure their systems and procedures operate in a manner that ensures consistent and well-documented decisions on account closures.

When will the Regulations apply from?

Subject to the Regulations receiving parliamentary approval, any framework contracts concluded on or after 28 April 2026 will be subject to the new requirements.

How can TLT help?

PSPs will need to review carefully their operational processes, procedures and contractual terms in readiness for the Regulations. At TLT, we support PSPs navigating the payments legal and regulatory landscape and can assist you.

Please do get in touch if you need any support.

Written by Matthew Atkinson with contributions from Alex Williamson

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2025. Specific advice should be sought for specific cases. For more information see our terms and conditions.