However, to secure an injunction, the account holder must first identify some breach of contract by the bank – a challenging task given the broad termination powers typically granted to banks within their terms and conditions.
If a customer can identify a breach of contract, then, in order to restrain closure of the account, they would also need to prove that financial compensation alone is inadequate to rectify their anticipated losses.
In essence, unless a customer can point to some kind of irreparable harm that is likely to befall their business because of the bank’s actions, that is a very difficult barrier to surmount.
New rules
This year, the government plans to introduce new legislation that will require banks to give at least 90 days’ notice of an account closure and explain their reasons for doing so.
Greater transparency will allow customers to make a fuller assessment about whether a bank’s decision to terminate their account is permitted under its terms and conditions.
However, since those terms will inevitably be skewed in the bank’s favour, details about the rationale behind an account closure are unlikely to be particularly helpful.
It is unlikely that substantial legal restraints will ever be placed on banks’ power to close accounts. However, the proposed legislative interventions to regulate de-banking must go further.
Such legislation could establish clear guidelines and procedures for financial institutions to follow when making decisions to terminate services to customers. It could also include provisions to ensure greater accountability and fairness in the de-banking process and provide for automatic compensation in certain cases.
That is, however, easier said than done. Crafting effective legislation in this area would require careful consideration of various factors, including the balance between financial institutions' autonomy and the need to prevent undue restrictions on access to financial services.
It would also need to address concerns related to compliance with anti-money laundering and counter-terrorism financing regulations.
Ultimately, however, the government must enact further protections for everyday customers who are suffering as an unfortunate and unintended consequence of the regulatory guidelines within which their banks are required to operate.
The government could also create a faster, streamlined process within the Fos to resolve retail customers’ de-banking queries, giving those without the means to go before the courts a way to appeal the bank’s decision in weeks rather than months.
Jean-Martin Louw is an associate at Collyer Bristow
