‘Debanking’ complaints to UK financial ombudsman surge

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Complaints about “debanking” in the UK have surged in the past year as more customers turn to the industry ombudsman over concerns their accounts have been frozen or closed.

Figures published on Sunday showed individuals and businesses made almost 3,900 complaints about account closures to the Financial Ombudsman Service in the year to April 5 — an increase of 44 per cent from the approximately 2,700 received the previous financial year.

More complaints are also being upheld, with 36 per cent of rulings made in favour of customers in the last year. This compares with less than 30 per cent over the previous three years.

Scrutiny of banks’ account closure practices has intensified since politician Nigel Farage had his account with Coutts shut last summer.

Farage obtained a dossier that showed the private bank had made the closure in part because his politics were deemed “at odds with our position as an inclusive organisation”.

The episode prompted Dame Alison Rose, chief executive of Coutts’ owner NatWest, to resign and put a political and regulatory spotlight on the issue.

The ombudsman said there had been a particular increase in complaints about cases relating to supposed financial crime and so-called politically exposed persons — individuals subject to greater scrutiny because they are regarded as being at higher risk of corruption.

Trade body UK Finance said banks have to comply with strict regulations and only close a small proportion of bank accounts, mainly due to financial crime and fraud concerns.

The latest “debanking” data was disclosed as part of a separate but related inquiry that the House of Commons’ Treasury committee is conducting into small businesses’ access to finance, although the figures supplied by the ombudsman covered both individuals and businesses.

In a letter to the committee, Abby Thomas, chief executive of the Financial Ombudsman Service, said the increase in complaint volumes “could be due to changes in banks’ processes and behaviours, but is also likely to be a result of the media interest in this issue”.

There was a particular increase in the number of complaints about debanking made by businesses, which leapt 81 per cent in the last financial year to more than 600.

Dame Harriett Baldwin, chair of the Treasury committee, said: “It’s clear there is evidence that some legally operating businesses are being unfairly debanked.

“Banks should be doing all they can to support small business in this country, not pulling the rug out from beneath them with little warning.”

A parliamentary committee last month found that more than 140,000 businesses had their accounts closed by the UK’s biggest banks last year.

A wide range of individuals and organisations have been affected by account closures.

England’s charities watchdog, the Charity Commission, has criticised banks for closing the accounts of not-for-profit groups. Sex workers have called on the MPs to ensure they can access banking in a petition that has gathered more than 11,000 signatures.

UK Finance added: “If a bank does have to close an account, this only happens after extensive review and investigation, with firms making significant efforts to contact customers to complete due diligence first.”

The government has pledged to increase the minimum notice that banks must give customers before closing an account from two months to 90 days and require lenders to explain their closure decisions in more detail.

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