Banks wrongly closing down customer accounts

SUSPICIONS of fraud are leading banks to wrongly close accounts or apply a marker which could affect a customer’s chance of getting a loan, according to Which?

The consumer champion said its findings are evidence that banks are not always taking sufficient care to avoid penalising innocent customers.

But the sanction can be an important tool in the crackdown on suspected fraud.

In the year 2022-23, the Financial Ombudsman Service received around 1,380 complaints about the closure of current accounts, upholding a quarter of them, said Which?

Customers who successfully claim against their bank to the ombudsman may not have their account reopened, but they could get compensation and an apology, the consumer group said.

A suspicion of fraudulent activity may lead to someone having a marker against their name on the Cifas national fraud prevention database.

They may struggle to be accepted for new products and services. But Which? said people could be unaware they are blacklisted and that other applications for bank accounts or cards which are refused would then negatively affect their credit score.

A UK Finance spokesman told Which?: “Protecting customers from the risks of fraud is an absolute priority for the banking 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.” 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? wants to see better communication to customers on what they need to do to challenge decisions.

“And we want fairer reviews by banks of these decisions, rather than leaving customers to have to take their claim to the ombudsman.” ●●Half of adults have never switched savings provider.

A poll of 2,000 adults found a quarter think switching is too much hassle – and 76 per cent would need to gain an extra £150 in interest every year to bother. But analysis has found a saver could earn an extra £319 annually in interest by changing.