Some banks are wrongly closing customers’ accounts or applying markers which could affect their ability to access finance, according to Which?
The consumer champion said its findings are evidence that banks are not always taking sufficient care to avoid closing down the accounts of innocent customers.
The ability for banks to close customers’ accounts quickly and without reason can, however, be an important tool in the crackdown on suspected fraud.
In the year 2022-23, the FOS received more than 1,380 new complaints about the closure of current accounts, upholding a quarter (25%) of them, according to data given to Which?
Customers who successfully make a claim against their bank to the FOS may not have their account reopened, but they could receive compensation and an apology, the consumer group said.
A suspicion of fraudulent activity may lead to someone end up with a marker against their name on the Cifas national fraud database.
Consumers with Cifas markers against their name can struggle to be accepted for new products and services, Which? said.
But it said people may be unaware of a marker against their name, which could mean they make other applications for bank accounts or cards without success, which could potentially negatively impact their credit score.
A UK Finance spokesperson told Which?: “Protecting customers from the risks of fraud is an absolute priority for the banking and finance industry.
“Any decision to close an account is only taken after extensive review and analysis of the activity on the account and each case is dealt with on an individual basis.
“Banks are required to adhere to legal requirements when assessing criminal activity and in every case, the bank must always ensure the customer is treated fairly. UK Finance runs a consumer education campaign, Don’t Be Fooled, which highlights the tell-tale signs and risks of being a money mule.
“We encourage all customers to never share their pins, passwords or passcodes with anyone or allow your bank account to be used by someone unless you know and trust them.”
Sam Richardson, deputy editor of Which? Money, said: “Having your bank account closed without warning can be an incredibly stressful experience – not least at a time when millions of households are struggling to pay the bills.
“Which? is concerned that some banks are wrongly closing customers’ accounts or handing them Cifas markers which can affect their ability to access other financial products for years.
“Which? recognises the importance of banks having the ability to close accounts quickly in the fightback against fraud, but wants to see better communication to customers on what they need to do to challenge decisions, and fairer reviews by banks of these decisions – rather than leaving customers to have to take their claim to the ombudsman.”
In a separate issue, which is also related to bank account closures, concerns have recently been raised over the way that “politically exposed persons” (PEPs) – those considered to be higher risk because of their political connections – have been treated by banks.
City minister Andrew Griffith recently wrote to the Financial Conduct Authority (FCA), urging it to prioritise an “important” review into whether people are being denied banking services due to their political views.
Mr Griffith wrote: “The Government is clear that domestic PEPs should be treated in a manner which is in line with their risk, and that banks should not be closing individuals’ accounts solely due to their status as a PEP.”
It followed previous claims by former Brexit Party leader Nigel Farage that he believed he was being targeted because of his status as a PEP.
The Treasury previously said it would be a “serious concern if financial services were being denied to those exercising the right to lawful free speech”.
It had already asked the FCA to review the current rules and publish its findings, including any recommendations.
A spokesperson for Cifas said: “Cifas members file individuals to the national fraud database to share information about accounts which indicate fraudulent conduct.
“Evidence to support markers must be robust and meet our standard of proof, and there are strict rules and guidance around the use of markers in automated systems.
“Out of hundreds of thousands of cases, we acknowledge that occasionally our members will place a marker where a consumer believes this is incorrect.
“There are clear processes in place for individuals to make an appeal and, where necessary, we are able to carry out an independent investigation and have cases removed or amended without the need to involve the Financial Ombudsman.
“This process is clearly explained on our website.”
“All Cifas members provide a Fair Processing Notice when a customer opens a bank account, and this explains how personal data is processed and the consequences of being filed to the database.”
Here are some suggestions from Which? for what innocent banking customers can do if their bank account is closed:
1. Make arrangements
Check what has happened to the money in your account, as banks deal with this differently. Direct debits may not be be paid, so contact receiving firms to make alternative arrangements.
2. Make a complaint
Complain in writing to your bank or provider first. If you are not happy with its response, or it does not respond in eight weeks, you can go to the FOS.
3. Look for Cifas markers
Check for a Cifas marker. To do this, make a data subject access request to Cifas online.
4. Challenge markers
Complain to the firm or organisation that recorded it. If this does not work, take your complaint to Cifas. If that fails, you could take the matter to the FOS.
