HMT announces new rules for bank account closures and payment service terminations

The HM Treasury (HMT) has published a draft statutory instrument introducing new rules requiring banks and payment service providers (PSPs) to give customers at least 90 days' notice before closing their account or terminating a payment service—an increase from the two months currently required. The draft Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025 is accompanied by an explanatory memorandum, and aims to protect customers from arbitrary account closures and ensures they receive a clear, written explanation, allowing them to challenge decisions through the Financial Ombudsman Service. The new rules will also support small businesses by providing more time to find alternative banking solutions, reinforcing the government's commitment to economic growth and security under the Plan for Change. Subject to Parliamentary approval, the legislation is expected to come into force in April 2026 and will apply to all PSPs terminating payment service contracts without a definite expiry date, including bank account closures, for contracts agreed from and including 28th April 2026. Certain exceptions will apply, for example, to enable PSPs to comply with their obligations under financial crime law.

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