Concerns about the seemingly arbitrary closure of bank accounts, often referred to as “debanking,” have been growing in the UK.

These concerns, particularly voiced by small businesses and individuals who found their accounts terminated with little notice or explanation, have prompted government action. In a significant move to protect access to banking services, HM Treasury has finalized new legislation aimed at curbing debanking practices.

The Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025, introduces crucial amendments to existing regulations governing the termination of payment service contracts. These new rules, expected to come into force for relevant new contracts from April 28, 2026, will place new obligations on banks, e-money firms, and other payment service providers when terminating certain customer contracts.

Key provisions of the new debanking rules

The new legislation introduces several key measures designed to provide greater protection for customers:

• Extended notice period: Banks and other payment service providers will now be required to give customers a minimum of 90 days’ notice before terminating an account or payment service. This significantly increases the current two-month notice period, providing customers with more time to challenge the decision or find an alternative provider.
• Clear and specific explanations: A crucial element of the new rules is the requirement for payment service providers to provide customers with sufficiently detailed and specific written reasons for the termination of their contract. This aims to address the opacity that has often characterized account closures, allowing customers to understand the rationale behind the decision and potentially challenge it.
• Complaint procedures: Alongside the explanation, payment service providers must also inform customers about how they can make a complaint against the termination decision. This ensures customers are aware of their avenues for recourse.
• Limited exceptions: While the new rules aim to provide robust protection, there are limited exceptions. These exceptions are primarily intended to enable payment service providers to comply with their obligations under financial crime law, such as instances of suspected money laundering or terrorist financing.

Background concerns and government response

The move to introduce these stricter rules follows increasing reports and high-profile cases of individuals and businesses facing unexpected account closures. Notably, in 2023, Reform UK politician Nigel Farage alleged that his accounts with NatWest subsidiary Coutts were closed due to his political views. While the FCA conducted a review and found no evidence of firms routinely debanking customers solely for their political beliefs, the incident and other similar cases highlighted the potential for arbitrary or poorly explained account closures to severely impact individuals and businesses.

Economic Secretary to the Treasury, Emma Reynolds, emphasized the importance of these changes, stating that “strengthening protections against debanking will protect people’s and businesses’ access to banking services.” The government aims to improve accountability within the banking sector and reduce the risk of unfair account terminations.

Implications for financial institutions:

Payment service providers will need to adapt their internal policies and procedures to comply with these new regulations by the April 2026 deadline. This includes:

• Revising internal policies: Updating termination procedures to reflect the extended 90-day notice period and the requirement for detailed written explanations.
• Staff training: Equipping employees to deliver clear, plain-language notices and to support impacted customers during the transition period.
• Developing mitigation strategies: Establishing processes to assist customers during the 90-day notice period, such as providing guidance on next steps or alternative services, taking into account the Consumer Duty where relevant.

Potential challenges and future considerations

While these new rules are widely welcomed by consumer advocates and businesses, some observers have raised potential concerns. There is a possibility that banks might respond by tightening their upfront checks during customer onboarding to avoid future account closures that will now involve more stringent procedural requirements. This could inadvertently make it harder for certain individuals and businesses to access banking services in the first place.

The legislation supports existing protections against discrimination based on political opinions or beliefs, which are enshrined in the Payment Accounts Regulations. Furthermore, the FCA has been actively engaging with firms on their obligations under the Consumer Duty, emphasizing the need for fair treatment and clear communication with customers regarding account access decisions.

The Financial Services and Markets Act 2023 provides the broader legislative framework for financial services regulation in the UK, granting powers to regulators and setting objectives for the financial system. The new debanking rules are a specific measure under this framework, addressing a growing area of concern.