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On June 13, 2025, HM Treasury published the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025, a statutory instrument (SI) that brings significant changes for payment account termination.
Coming into effect on April 28, 2026, the amendments apply to framework contracts for payment services concluded for an indefinite period on or after that date.
An area whereby there is a key change is that payment service providers (PSPs) will be required to give at least 90 days’ notice before terminating such contracts, replacing the current two-month requirement.
Termination notices must provide sufficiently detailed, specific reasons for termination, and inform customers of their right to complain both to the provider and to the Financial Ombudsman Service (FOS).
Exceptions to the 90-day notice requirement are also provided in the new legislation.
Notably, this can be applied by PSPs in cases involving anti-money laundering (AML) obligations, immigration compliance, suspected serious crime or certain public order offences.
Parallel amendments are made to the Payment Accounts Regulations 2015, aligning notice periods and information requirements for designated credit institutions, otherwise known as banks, when refusing applications or terminating framework contracts.
The bigger picture
This legislative change surfaced under the last government, when the then Conservative administration responded to increasing concerns about debanking.
The issue had affected members of the UK’s political class, such as Reform leader Nigel Farage and even the then Chancellor of the Exchequer Jeremy Hunt, who was reportedly denied an account with Monzo.
The situation became something of a media frenzy in 2023, but did reveal the problems that some segments of society faced when accessing financial services.
The new requirements address growing concerns over abrupt account closures, and align well with the Financial Conduct Authority’s (FCA) flagship Consumer Duty policy, which is focused on fair treatment and positive outcomes for consumers.
The SI balances more rigorous consumer protections with continued financial crime prevention.
It maintains the flexibility for PSPs to act quickly when necessary within the carve-outs included for cases involving AML obligations, immigration enforcement or suspected serious crime.
This means that PSPs are less likely to face reputational damage by trying to comply with the statutory requirements and then erroneously allowing criminals to launder money through their systems.
Why should you care?
The overhaul will spark changes for organisations that provide payment accounts, from banks to e-money institutions.
Firms that have a presence in the UK should prioritise reviewing their framework contracts to make sure that termination clauses are reflective of the new 90-day notice period for contracts entered into on or after April 28, 2026.
Contracts should clearly set out customers’ rights, complaint mechanisms and the circumstances under which exceptions may apply.
PSPs should also consider developing and/or refining their internal procedures for contract termination.
This includes clear escalation paths for decisions to terminate, and staff that are involved in termination decisions should be trained to apply the new standards, particularly the requirement to provide specific and detailed reasons for termination.
This will be important to ensure customer communications, under scrutiny due to the Consumer Duty, are at a high standard.
Firms should also prepare for increased communication with the FOS. As the changes require detailed termination reasons and mandate that customers be informed of their right to complain to the ombudsman, the likelihood of complaints escalating will rise, particularly in sensitive cases such as account closures.
Firms need to bolster their complaints handling process to ensure that it is robust and that there is a focus on resolving issues quickly and fairly before an escalation is triggered.
This should be supported by regular reviews of complaints trends to identify recurring problems, and employees should also be trained to handle sensitive conversations, particularly around contentious account closures.
This means not entirely outsourcing communication to artificial intelligence (AI) systems and maintaining the human element in that area of business.
Legal and compliance teams should also review templates so that regulatory standards are met while minimising the risk of complaints.
Thorough documentation of all termination decisions, especially those involving exceptions like suspected financial crime, is essential, as detailed records will be crucial for defending actions if challenged at the FOS.
Firms’ regulatory and government affairs teams should also be prepared to engage proactively with the FOS by preparing standard response templates and evidence packs for common complaint types.
Keeping up to date with relevant FOS decisions once the legislation is enacted will help firms refine practices and reduce the risk of repeat adverse findings.
