On 14 March 2024, HM Treasury (HMT) published a near final version of the Payment Services (Contract Terminations Amendment) Regulations 2024 together with a policy note.

The draft statutory instrument and policy note follows HMT’s earlier policy statement published last November on payment service contract termination rule changes. The policy statement was published following a review of the Payment Services Regulations 2017 in response to several high-profile instances of alleged ‘de-banking’ where the termination of a bank account or payment service was motivated by a customer’s personal or political beliefs.

The core reforms to legislation contained in the draft statutory instrument apply to provider-initiated terminations of framework contracts concluded for an indefinite period and entered into on or after the day the draft statutory instrument would come into force. The changes include:

  • The notice period for provider-initiated terminations of framework contracts concluded for an indefinite period is increased from the current two months to 90 days.
  • Providers will be required to give affected users a sufficiently detailed and specific explanation so the customer can understand why their particular contract is being terminated.
  • Clarification that it is prohibited to insert clauses in contracts which avoid the new termination requirements by providing for discharge of the contract by agreement.
  • Specific circumstances may disapply some or all of the requirements to ensure that providers can continue to meet other requirements and duties.
  • Corresponding changes are made to rules concerning the refusal of applications for and termination of basic bank accounts in regulations 25 and 26 respectively of the Payment Accounts Regulations 2015.

The draft statutory instrument also sets out certain exceptions to the requirements including where providers are obligated to cease transactions with the user under regulation 31(1) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 because they are unable to apply customer due diligence measures.

The Government intends to lay the draft statutory instrument before Parliament this summer, subject to Parliamentary timing, and for it to commence as soon as practicable thereafter. HMT will consider technical comments on the draft statutory instrument to achieve the policy intent set out in the policy note.