Barclays leads complaint list for closing accounts for small businesses

Barclays has emerged as the most complained about bank for closing small business accounts.

Of the 413 complaints made to the Financial Ombudsman Service relating to small business banking between April 2022 and September 2023, Barclays was responsible for almost half, with 205 complaints.

After Barclays, HSBC recorded 67 complaints, Lloyds with 57, NatWest with 53 and Santander with 31. This compilation from the ombudsman sheds light on the top five banks receiving complaints about business account closures.

Jean-Martin Louw from law firm Collyer Bristow highlighted the significant impact of unexpected account closures on small businesses. Such closures can disrupt financial operations, hinder payment of invoices and salaries of staff, and hinder access to necessary funds.

The Financial Ombudsman Service provides help to businesses with an annual turnover of less than £6.5 million who are experiencing problems with financial services providers. Of the 85 complaints filed against Barclays between April 2023 and September 2023, 26 percent were upheld, compared to 9 percent of the 76 resolved cases in 2022-2023.

Consumer rights expert Martyn James stressed the importance of close supervision of banks to ensure fair treatment of customers, especially in cases of account closures without explanation.

The closure of client accounts has led to increased scrutiny, as evidenced by Nigel Farage’s closure of Coutts last June. Martin McTague of the Federation of Small Businesses highlighted the devastating impact of such closures on small businesses, underlining the power imbalance between small businesses and big banks.

Although banks are not legally obliged to provide reasons for closing accounts, they must give two months’ notice. The government is exploring measures to strengthen regulations, including requiring 90 days’ notice before closure and requiring explanations except in exceptional circumstances.

Barclays attributed most of the closures to the need for updated customer information to combat financial crime and meet regulatory requirements. The bank reiterated its efforts to minimize account closures and urged customers to keep up-to-date information. HSBC, Lloyds Bank and Santander said the closure of accounts was in line with legal and regulatory obligations, while NatWest was unavailable for comment.