A consumer group has expressed concerns over banks closing customers’ accounts without sufficient reason and marking them as potential fraudsters in a data sharing system. This could prevent customers from obtaining accounts elsewhere. While it is important for banks to quickly close accounts to prevent fraud, the consumer group suggests that the decisions should be reviewed more fairly and customers should be informed about how they can challenge these decisions. Banks typically provide at least 30 days’ notice when closing accounts, unless there is evidence of threatening or abusive behavior or suspected fraud. However, some banks proceed to mark customers as potential fraudsters in the National Fraud Database (NFD) maintained by Cifas, without notifying them. This marker can lead to rejection from obtaining financial services for up to six years and further damage to their credit ratings.
In some cases, customers are wrongfully suspected of fraud or unknowingly involved in fraudulent activities. Examples include Metro Bank closing an account based on a fraudulent complaint, which was later found to be a delivery delay, not fraudulent activity. Santander closed another account after the customer unknowingly received funds from a fraudulent source. These unfair account closures have led to consumer complaints, with the Financial Ombudsman Service (FOS) upholding a quarter of the cases brought before them.
Figures obtained by the consumer group show that there were a minimum of 1,389 new complaints about account closures in the year 2022-23, with a quarter of them deemed unfair by the FOS. Additionally, there are currently 375,000 “misuse of facility” markers in the Cifas database, 70,000 of which were added last year. While Cifas claims that these markers have prevented £1.6 billion worth of fraud in 2022, Which? believes that better communication and fairer reviews by banks are necessary. The consumer group advises individuals whose accounts have been closed to check their funds, make a complaint, and escalate the matter to the FOS if the bank does not respond satisfactorily. They should also request a data subject access request to Cifas to check for any markers and challenge them if necessary.
Both UK Finance and Cifas have responded to the concerns. UK Finance emphasizes that protecting customers from fraud is a priority and that account closure decisions are made after thorough reviews. They also encourage customers to be cautious and never share sensitive information. Cifas states that markers are placed in the national fraud database based on robust evidence but acknowledges that errors can occur. They provide a process for individuals to appeal and have markers removed or amended without involving the Financial Ombudsman.
Overall, the consumer group calls for improved communication, fairer reviews, and clearer processes for challenging decisions and markers to protect customers from unfair account closures and potential financial repercussions.