UK government strengthens protection against debanking

On 28 April 2025, the UK government confirmed that it will be introducing new rules that will improve the protections a customer has if a payment service provider (PSP) terminates their contract. The changes are expected to come into force on 28 April 2026.

Background

In July 2023, in the wake of public concern about payment accounts being closed without fair justification (referred to as 'debanking'), the Sunak administration announced that it would be enhancing the payment account contract termination provisions set out in the Payment Services Regulations 2017 (PSRs).

In October 2023, the government published a policy statement on next steps, which was followed in March 2024 by the publication of near-final legislation and a policy note.

The Financial Conduct Authority (FCA) has been working closely with the government on the issue of payment account access, releasing its findings from a review of UK payment account access and closures in September 2023 and an update on its follow-up work a year later.

What is changing?

Subject to parliamentary approval, the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025 (Regulations) will amend regulation 51 of the PSRs and introduce four new regulations, regulations 51A to 51D.

In particular, there are new notice requirements for framework contracts concluded for an indefinite period and entered into on or after 28 April 2026. The key changes are:

• PSPs must give 90 days' notice instead of two months' notice before the termination of a contract takes effect.

• Termination notices must be in writing and include an explanation of the reasons for the termination. The explanation should be sufficiently detailed and specific to enable the payment service user to understand why the framework contract is being terminated. The payment service user must also be told how a complaint against the termination may be made against the PSP and any right they may have to complain to the Financial Ombudsman Service.

There are exceptions to these requirements. For example, no termination notice will be required if the PSP must apply customer due diligence measures under anti-money laundering legislation.

The Regulations also make changes to the Payment Accounts Regulations 2015 to ensure that the notice period and requirements to give reasons applying to basic bank accounts are aligned with the new provisions in the PSRs for contracts entered into on or after 28 April 2026.

The Regulations are accompanied by a draft explanatory memorandum.

The FCA will be updating its Payment Services and Electronic Money Approach Document to reflect the legislative changes.

Help is at hand

If you would like to discuss the impact of the changes on your business, please contact a member of our Financial Services Regulatory team.