Banks have come under fire this week for allegedly closing customer bank accounts over their political views.
Politician Nigel Farage claims his checking account – presumably with private bank Coutts – was closed because of his Brexit campaign.
Farage told MailOnline: “Some of these ridiculous rules and closures have extended to my immediate family. I am furious and also feel guilty that members of my family are being punished for my campaign to leave the European Union.”
Banks are even facing a Treasury inquiry into the matter – whether or not the complainants are right about why their accounts have been closed.
Don’t count on it: Big banks have been accused of closing customer checking accounts because of their opinions
The closures have sparked outrage from the public, many of whom believe banks should not be allowed to close accounts because of political views, no matter how unpleasant.
The problem is exacerbated by a lack of transparency surrounding bank account closures.
For years, bank account customers have complained about accounts being closed without warning and without excuse, thanks to money laundering laws.
What can banks close your current account for and what can you do about it?
Check the fine print
What a bank can close your account for is stated in the terms and conditions for payment accounts.
These are quite similar from bank to bank, with some minor changes.
For example, HSBC’s fine print says it can close an account if the owner breaks the law, lies, abuses staff, withholds information, would cause HSBC to break rules, or breach the contract “seriously and persistently.”
Barclays’ current account terms and conditions allow it to close accounts for crime, employee abuse, lying about personal information, breach of contract or putting the bank in a position where it could violate banking rules.
It can also close an account if it has not been used for a ‘long time’ or if a customer no longer meets the criteria to keep an account open, such as an income of at least £75,000 for their Premier checking account.
NatWest and Lloyds may close current accounts for similar reasons.
Normally banks have to tell a customer why they are closing an account.
However, there are also two loopholes that allow banks to close an account without giving any reason.
The first is the ‘tipping off’ rules of the Proceeds of Crime Act 2002.
In this context, tipping occurs when a bank informs a customer that there may be an investigation by the police.
This situation can arise, for example, if the police tell a bank that the customer is under investigation for money laundering.
Unless the police say otherwise, the bank will then freeze or close the customer’s account. But the bank can’t tell the customer why because that would give them a ‘tip’.
Anyone found guilty of tipping could face a prison sentence under the Proceeds of Crime Act, including bank employees.
This law only applies to customers suspected of money laundering and other crimes, but critics believe the law is also being used by banks to ‘hide behind’ when closing accounts for other reasons.
Hot tip: Many banks will not give a reason for closing current accounts due to UK law
An even wider loophole is the UK Finance banking trade organization’s guidelines for getting rid of a customer.
According to these guidelines, banks do not have to tell a customer why they are closing their account if it is not ‘appropriate or permitted’.
This includes a customer violating the bank’s terms and conditions, abusing it or if the bank has been ordered not to speak by regulators, the government or the police.
This is Money approached the UK’s largest banks on the matter: Lloyds Banking Group, including Bank of Scotland and Halifax, NatWest, including Royal Bank of Scotland, Barclays, HSBC and Nationwide.
All declined to comment, but referred to a joint statement from UK Finance.
A spokesman for UK Finance said: ‘Companies recognize the importance of customers not having their accounts closed inappropriately or unfairly, and so the decision to close an account is only made after extensive review.
‘UK Finance has no information on individual cases, but some of the reasons a company may decide to close an account are breaches of terms and conditions; abusive or threatening behavior; or suspicious activity on the account.
“If a company comes to the conclusion that it cannot continue to provide services, it must communicate this to the customer as far as permissible and, in any event, treat the customer fairly.”
What to do if your bank wrongfully closes your account?
If you have already made a complaint to your bank and have not admitted it, your only option is to turn to the Financial Ombudsman if you believe your bank has been unfair.
The FOS wants banks to be fair and reasonable when closing current accounts and give them at least 30 days’ notice unless:
- Banks suspect customers of fraud
- Customers threaten or insult bank employees
But even the FOS guidelines for banks say, “You don’t have to explain to a customer why you closed their account, but it can help.”
You can submit a complaint to the FOS online here. The service is free.
If your current account has been closed without warning or explanation, please contact: editor@thisismoney.co.uk
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