Growing Public Awareness
In the summer of 2023, public interest was piqued by a growing awareness of the practice of ‘debanking’, whereby the account of an individual or organisation is closed by their bank, often without any reason having been supplied.
As a direct consequence, the Conservative government at the time published two policy documents, in the summer and autumn of 2023, which set out its plans to “enhance requirements relating to the process and conduct requirements placed on providers of payment services in cases of framework contract termination”.[1]
Proposed Draft Regulations
Following engagement with leaders of the UK’s largest banks and building societies, and consultation with the Financial Conduct Authority, the current Labour government has published its own draft regulations, titled ‘The Payment Service and Payment Accounts (Contract Termination) (Amendment) Regulations 2025’ (the Draft Regulations), on 28 April 2025.
Regarding debanking, the Draft Regulations set out that, before a payment service provider is able to terminate a framework contract concluded for an indefinite period and entered into on or after 28 April 2026 between them and the payment service user, they must:
- provide a notice of termination at least 90 days before the termination is to take effect;
- deliver, in the notice of termination, a detailed and specific explanation of the reasons for the termination; and
- set out how a complaint against the termination may be made to them, or to the Financial Ombudsman Service.
The requirement to provide a notice of termination will not apply in relation to specific areas, including certain money laundering offences, immigration requirements, and public order offences.
Benefits & Continuing Concerns
The Draft Regulations seek to establish a “higher and more consistent standard of treatment for payment service users”[2], and to require banks to provide reasons when terminating relationships with customers.
Questions remain, however, as to whether the Draft Regulations go far enough to protect payment service users from capricious debanking practices, and whether these new rules simply provide greater cover for payment service providers to pursue the same course of action. In short, whilst the Draft Regulations might offer procedural comfort, they arguably do little to assuage public concern regarding the substance of the issue of debanking.
Furthermore, the Draft Regulations only provide for this new level of protection for those applicable contracts entered into on or after 28 April 2026, thus subjecting all applicable prior contracts to the old regime.
[1] ‘Payment service contract termination rule changes: Implementation, timings and next steps’, October 2023
[2] ‘Draft Explanatory Memorandum to The Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025’, April 2025
