Labour has announced new rules to clamp down on potential debanking following the controversy between NatWest-owned Coutts Bank and Nigel Farage in 2023.
The Government is now requiring banks to give customers at least 90 days' notice before closing their accounts, a significant increase from the current two-month requirement.
These regulations are expected to come into force for new contracts from April 2026 and are part of the Government's Plan for Change.
The said rules will apply to banks, building societies and other payment service providers across the UK.
Labour is introducing new rules to clampdown on debanking after last year
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Under the new legislation, banks will be required to provide customers with a clear written explanation for account closures.
This will enable customers to challenge decisions they disagree with, including through the Financial Ombudsman Service.
The extended notice period gives people more time to contest closures or find alternative banking arrangements.
Small businesses, which have complained about accounts being closed without reason at short notice, will particularly benefit from these changes.
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Banks will be legally obligated to adhere to the new rules
GETTYThe regulations aim to prevent situations where customers are left with insufficient time to complain or secure replacement banking services.
Economic Secretary to the Treasury, Emma Reynolds, said: "Delivering economic security for working people is at the heart of our Plan for Change and strengthening protections against debanking will protect people's and businesses' access to banking services.
"Under the new rules, customers will receive more notice of account closures, be entitled to an explanation as to why their account has been closed and have more opportunity to challenge such decisions."
The nine largest personal current account providers in the UK are already legally required to offer basic accounts to people who legally reside in the UK.
The legislation will support existing protections against discrimination.
Banks are prohibited from denying UK consumers access to payment accounts based on political opinions or beliefs.
LATEST DEVELOPMENTS:
Nigel Farage uncovered a debanking scandal after being told his Coutts account would be closed PAThe Government's latest move seeks to address concerns about politically-motivated account closures that have affected some individuals and organisations.
However, this legislation will not come into effect until 2026.
The measures will be subject to certain exceptions, including enabling payment service providers to comply with their obligations under financial crime law.
