New UK Requirements for Payment Account Contract Terminations

HM Treasury has published a policy note and a draft statutory instrument—The Payment Services and Payment Accounts (Contract Terminations) (Amendment) Regulations 2024—on strengthening requirements in the Payment Services Regulations 2017 on contract terminations. These policy changes follow the furore over the de-banking by NatWest Bank of the prominent U.K. politician Nigel Farage, which led to the resignation of its CEO.

The amendments will apply to all terminations initiated by a payment service provider of a framework contract that is concluded for an indefinite period and that is entered into on or after the day the statutory instrument comes into force. The draft SI provides for increasing the notice period from two months to 90 days, requiring PSPs to provide the customer with a sufficiently detailed explanation as to why the contract is being terminated and ensuring that PSPs cannot opt out of the new termination requirements through contract. There are several exceptions to the new requirements, such as when a PSP must act in compliance with anti-money laundering or immigration laws or where the PSP reasonably believes that the account is being used for criminal purposes.

HM Treasury intends to lay this instrument before Parliament in summer 2024. HM Treasury recently published its related policy note and draft statutory instrument—The Payment Services (Amendment) Regulations 2024—on mitigating the risks of authorized push payment fraud.

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