Despite the recent attention given to Nigel Farage and the resignation of NatWest chief executive Alison Rose, there is a long-standing issue that needs to be addressed: banks closing accounts without providing a reasonable explanation. This is a concern for ordinary people who don’t receive the same level of attention or apologies as high-profile figures.
I personally experienced this fifteen years ago when Royal Bank of Scotland decided to end their banking services for me. I understood the reason behind it as my partner, who I was financially associated with, had a troubled business account with the bank. We were abruptly cut off without any warning or explanation. I moved on and opened an account elsewhere.
However, for some people, opening a new bank account after such an ordeal is extremely challenging. The requirements of photo ID, utility bills, money, address, and credit checks can make it difficult to fulfill all the criteria. Even if you have all the necessary documents, banks can still reject your application without any explanation.
As a debt adviser, I have witnessed many cases like this. One example is a former client who suffered financial abuse from their ex-partner. After leaving the abusive relationship, they discovered that they had accumulated debt and were labeled as a “fraud risk” by Cifas, a fraud prevention service. Despite no actual allegations or convictions of fraud, this label made it nearly impossible for the client to access banking facilities when they needed them the most. Pleas for understanding were ignored, and other banks refused to provide services based on this marker.
According to a government-backed advice service called MoneyHelper, banks can refuse an account or close an existing one if they suspect unlawful or fraudulent activity. However, the decision-making process behind these suspicions is vague, and banks don’t provide an opportunity for customers to explain their circumstances.
We’re talking about basic bank accounts here, without any credit options or overdraft facilities. Without access to a basic account, life becomes incredibly difficult. I recently had a client whose universal credit payment was deposited into a suddenly closed account without any warning. She couldn’t access her own money, and despite her efforts to resolve the issue with the bank, she received no assistance. This left her unable to pay for essentials like food and utilities. Only after making a formal complaint and threatening legal action, she was able to retrieve her money by visiting a branch in person.
The lack of transparency and support from banks in these situations is a significant problem. People who are already struggling to make ends meet don’t have the energy or resources to navigate through complaints procedures or send requests for information. Account closures have far-reaching consequences, particularly for those who aren’t wealthy. It affects their ability to pay rent, council tax, and make necessary bookings or transactions.
The recent attention on Farage and his experience with debanking may lead to much-needed scrutiny of how banks treat their customers. Suggestions for improvement include providing clear explanations for account closures and extending the time given to find alternatives. This is crucial because a bank account, especially with the decline of physical branches, is an essential part of our daily lives.
Amy Taylor is a debt adviser and chair of Greater Manchester Money Advice Group
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