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Banks ‘may be wrongly closing accounts or silently marking them for fraud’

todayAugust 12, 2023 3

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Banks ‘may be wrongly closing accounts or silently marking them for fraud’

Banks may be wrongly closing customers’ accounts or silently marking them for fraud concerns, a consumer group has warned.

Data, obtained by Which?, shows the Financial Ombudsman Service (FOS) received more than 1,380 complaints about current account closures in the year 2022-23.

A quarter of the complaints were upheld, according to the data.

Which? says the figures show banks are not always taking sufficient care to avoid closing down the accounts of innocent customers.

The consumer group also warns that banks may be silently applying markers against customers’ names on the Cifas national fraud database if they suspect fraudulent activity.

This could leave customers unable to open new accounts or access other financial products, without them knowing the reason, Which? warns.

It comes after former UKIP leader Nigel Farage – in a separate issue – sparked a row by claiming that his bank account with Coutts had been closed due to him being a “politically exposed person”, or PEP.

The BBC later reported that the reason for the withdrawal of services was due to Mr Farage falling below the level of wealth required by Coutts – something the Brexit campaigner did not deny.

Beth Rigby and Nigel Farage

Image:
Nigel Farage

In response to the row, City minister Andrew Griffith 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.

The Treasury has also asked the FCA to review the current rules about account closures and publish its findings, including any recommendations.

Which? said it recognises the importance of banks having the ability to close accounts quickly in the fightback against fraud.

But the consumer group added that it wants 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”.

Deputy money editor of Which?, Sam Richardson, 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.”

Sam Richardson, the deputy money editor of consumer group Which?

Image:
Sam Richardson, the deputy money editor of consumer group, Which?

The consumer group says those who believe their bank account has been unfairly closed should attempt to make alternative arrangements for their payments to avoid fees or charges.

They should also make a complaint to their bank and make a data request to Cifas online to check for a marker, which they can then contest.

Read more:
What happened with Nigel Farage’s account?
UK Finance says accounts should not be shut for political reasons

If that fails, customers could then attempt to make a complaint through the FOS, Which? said.

Customers who successfully make a claim may not have their account reopened, the consumer group warned, but they could receive compensation and an apology.

A UK Finance spokesperson said any decision to close an account is only taken after an “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,” the spokesperson said.

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A spokesperson for Cifas said: “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.”

Written by: Newsroom

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