Imagine going to use your bank account only to be told that it’s been frozen, or worse, closed. That means no cash, no regular payments, no card, nothing. What’s worse, on calling customer services (and managing to get through) you are told that there’s nothing that can be done, and no-one can help.
Lots of people are reporting that their bank accounts are being closed. The rules around this are opaque – and sadly the bank can do this without explanation. Here’s how it works.
The rules allow your bank to terminate your relationship without having to give a reason. But you must be given a notice period, generally held to be 30 days, so you can make alternative arrangements. This may be longer for business accounts.
Part of the problem with account closures and, well, giving people closure, is widespread misunderstanding over the Money Laundering Regulations.
In short, if someone is suspected of money laundering (or other financial crimes) staff are legally prevented from discussing the matter with the customer. In fact, to do so is a crime and is subject to prosecution. But money laundering investigations are really rather rare and most bank staff will never come across one in their careers.
Reasons for banks closing accounts
Trying to find out why your account has been closed is almost impossible with some banks. But usually the reasons are:
- Suspicious transactions outside of the normal range in the account;
- Lack of use;
- Suspected fraud;
- Personality clashes (you’ve been rude to staff repeatedly);
- Support for unlawful activities;
- Reputational risk.
And potentially:
- Automated systems making mistakes;
- People making mistakes.
What can you do if you bank closes your account?
Though the bank can’t be forced to tell you why it’s closed your account, you can complain about it if you think it’s made a mistake. This matters because in the process of making the complaint or going to the Financial Ombudsman Service, you might get the answer you need.
Your bank won’t say to you that it thinks you’re up to something dodgy. However, if you ask “Has my account been closed because of these transactions, because I can explain them” there’s a chance they’ll either acknowledge the problem or say no, in which case you can strike that one off the list.
You can also ask to speak to the bank’s actual fraud investigation team, who are more likely to take a realistic approach to things on the system that have triggered your account being frozen or closed.
Mistakes do happen and sometimes you might be confused with someone with a similar name who is on a list of fraudsters somewhere. Or someone might have just typed the wrong thing into the computer. When taking your complaint further, explain that you’re concerned about incorrect information that may be on file that has the potential to affect your credit or reputation and ask for it to be corrected.
Always take the complaint to the final stage of the bank’s complaints process and get a written response. The higher up you go, the more likely someone will take a pragmatic look at the situation.
The ombudsman can’t reveal to you what it’s been told by the bank confidentially, but it can check that information to see if it seems fair or accurate.
In the vast majority of cases, the reason for the closure was a mistake or something really minor. And there is no reason why people can’t be told this. It’s high time this veil of secrecy was swept away once and for all – and built into the regulations if need be.
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