High street banks, including Lloyds, HSBC and NatWest and other payment service providers will become subject to new “de-banking” rules in days. De-banking is when banks “close or refuse to open accounts for certain customers, often due to regulatory concerns, risk management, or profitability issues”, Card One Money explains.
“This can affect both business and personal customers and means that unless the customer keeps accounts at another financial institution, they risk having no access to banking services, for an unknowable period of time.” Banks have argued that it’s an important way to protect themselves against risks like money laundering, funding terrorism, and other reputational threats. But critics have warned that it can lead to people being unfairly excluded from banking services without explanation.
However, banks and service providers will be required to give customers at least 90 days’ notice before closing their account or terminating a payment service – an increase from the two months currently required – under new rules coming into force in days.
It will apply to relevant new contracts agreed from and including Tuesday, April 28, 2026, when the legislation comes into effect. The new rules will also apply to the termination of basic personal bank accounts from that date.
All payment service providers who decide to terminate payment service contracts without a definite expiry date, including bank account closures, will be subject to the rules, the Government said last year.
Banks will also be required to give customers a clear written explanation so they can challenge decisions, such as through the Financial Ombudsman Service.
The Government says the new rules will give people more time to challenge decisions they disagree with and find an alternative bank.
“This will support small businesses which have complained about their account being closed without reason at short notice – leaving them no time to complain or find a replacement bank,” it adds.
However, it notes that the measures are “subject to certain exceptions, for example, to enable payment service providers to comply with their obligations under financial crime law”.
The nine largest personal current account providers in the UK already have to offer basic personal bank accounts to people who legally reside in the country and don’t have one or aren’t eligible for one, the Treasury says.
The new measures add to other existing protections, such as those which prevent banks from discriminating against consumers based on political opinions or beliefs when accessing a payment account.
In the April 2025 announcement of the measures, then Economic Secretary to the Treasury, Emma Reynolds, said: “Delivering economic security for working people is at the heart of our Plan for Change and strengthening protections against debanking will protect people’s and businesses’ access to banking services.
“Under the new rules, customers will receive more notice of account closures, be entitled to an explanation as to why their account has been closed and have more opportunity to challenge such decisions.”