Debanking complaints to financial ombudsman surge

The complaints data, which appeared in a response to a query made to the FOS by members of the Treasury select committee, also show a 69 per cent rise in debanking complaints across the four years from 2,281 in 2020 to 3,858 by the end of 2023.

The FOS ruled in favour of customers in 36 per cent of debanking cases made in 2023, up from 27 per cent of cases in the three previous years, according to the evidence it submitted.

Dame Harriett Baldwin, chairman of the Treasury committee, said the FOS data would be used in a forthcoming report from the group to highlight the financial impact on small and medium-sized businesses in particular.

She said: “When we set out on our inquiry into financing for small and medium-sized businesses, we weren’t necessarily expecting debanking to emerge as a key issue.

“But as they say, you must go where the evidence takes you – and it’s clear there is evidence that some legally operating businesses are being unfairly debanked.

“Banks should be doing all they can to support small business in this country, not pulling the rug out from beneath them with little warning. I expect our report will have something to say about what we’ve uncovered.”

Increasing workload

Abby Thomas, chief executive and chief ombudsman at the FOS, said in a letter to the committee that “not all account closure cases relate to sensitive issues, like financial crime. Many cases we see stem from closures due to account inactivity, incomplete information in standard checks, or the bank’s own commercial reasons.”

She added: “We believe only a small proportion of the complaints customers raise with their banks are then referred to us, as the bank is typically able to resolve the issue to the customer’s satisfaction.”

The FOS also said in its evidence to the committee that it had increased the number of staff working on cases about debanking and motor finance commission to 160.

Ms Thomas said: “The number of staff working on these cases has increased in the past financial year and we are continuing to train more staff on these complaints.” She added that the staff had been stationed to “provide a further surge response if required.”

Car finance is currently subject to an investigation by the Financial Conduct Authority over allegations of unfair discretionary interest rates.