Regulators call out big banks for ‘suddenly closing or suspending’ charity accounts
Charities are being unfairly “debanked”, according to regulators, who have called on high street lenders to improve their “substandard” services for the sector.
Britain’s three charity regulators said in an open letter sent to banking chiefs that groups had seen their accounts closed or suspended suddenly, with “poor customer service and administrative delays”.
The watchdogs argued that charities were struggling with disruption to their operations and in some cases unable to pay staff.
Complaints about bank account closures have surged this year, according to the latest figures from the Financial Ombudsman.
“The current stresses for charity trustees are heightened by avoidable frustrations at the availability of bank accounts and substandard service from banks,” the Charity Commission’s chief executive, Helen Stephenson, told the group’s annual meeting in Liverpool on Wednesday.
“Too often, charities experience accounts being closed or suspended suddenly for long periods of time with poor customer service and administrative delays. This letter makes clear that we consider the service charities experience is unacceptable. The scale of the response from banks needs to improve, now, and at pace.”
The letter cited one example where a charity’s account was frozen with short notice after the bank asked for scanned identification from more than 60 trustees, many of whom were elderly with no access to internet banking.
Another charity’s account was frozen after a bed-bound trustee with cancer could not sign a document, despite having dozens of signatures from other trustees, regulators said.
Other challenges flagged in the letter included the reduction of bespoke banking services, poor customer service and unsuitable online banking services.
“Inadequate banking provision drives charities to rely on unsafe practices, such as trustees using their own bank accounts, or keeping large cash reserves unsecured – and public trust in charities may become eroded,” it said.
Regulators called on big banks to make the process of setting up a charity bank account more straightforward and better train staff on how charities are run.
A spokesperson for UK Finance, the trade body for banks, told Morning Wire: “Banks always seek to deliver the best service for all their customers and listen to feedback from customers who have experienced issues or delays in accessing services.
“We understand the impact account freezes or closures can have, particularly on smaller and community organisations. Banks will therefore only take this decision after an extensive review and analysis of an account in line with their various regulatory obligations.”
“There are a number of charity and community bank accounts available on the market and we’d encourage community organisations to shop around for the right banking service for them,” the spokesperson added.