With the 28 April 2026 implementation deadline approaching, banks and payment firms should now be finalising preparations for changes to existing rules governing payment account application refusal and termination as set out in the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025. These new regulations introduce amendments to the Payment Account Regulations 2015 (PARs) and the Payment Services Regulations 2017 (PSRs).
The amendments serve to protect customers from the risks associated with debanking and ensure consistent, accountable offboarding practices for banks and payment firms. The new requirements compliment wider regulatory initiatives such as the Consumer Duty outcomes, particularly consumer understanding and support.
For many firms the new regulations will mean more than just procedural changes.
What is changing?
At a high level, the reforms introduce several key changes on how firms communicate payment account application refusals, and impose longer termination notice periods and more stringent account termination explanations on account providers.
PARs amendments:
Payment account application refusal and termination notice:
Under the new rules, credit institutions subject to the PARs must now ensure that they provide consumers with a sufficiently detailed and specific reason for refusing their application for a payment account with basic features. The rationale behind the change is to ensure that consumers have a proper understanding regarding why their application was refused. In addition, all new framework contracts entered into on or after 28 April 2026, a notice period of at least 90 days is required before the termination enters into force.
Firms are not obligated to provide specificity for application refusal or account termination when doing so would be unlawful. The obligation on firms to provide the consumer with information on how to complain and their right to make a complaint to the Financial Ombudsman Service (FOS) remains in place.
PSR amendments:
Inclusion of the definition of serious crime and new notice termination requirements
For framework contracts concluded for an indefinite period and entered into on or after 28 April 2026, payment service providers (PSPs) must:
- provide a payment service user (PSU) with a notice of termination at least 90 days before the termination takes effect;
- deliver a termination explanation that is detailed and specific to allow the PSU to understand exactly why their contract is being terminated; and
- deliver a termination explanation that is easily accessible, understandable, in a clear and comprehensible form, and in the language agreed by the PSP and PSU.
Discharge by agreement cannot be relied upon to avoid application of these new requirements.
The new termination requirements do not apply in instances where a PSP is required to adhere to certain provisions within the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, and the Immigration Act 2014. The amended rules introduce the definition of ‘serious crime’ and indicate where a PSP has reasonable grounds to suspect a payment service is being used in connection with such crimes, the termination requirements do not apply. Where a PSP suspects commission of an offence the termination requirements may also be waived, and the obligation to provide a PSU with 90 days’ notice does not apply in relation to certain public order offences.
Operational impact: What firms should be finalising now
With the rules coming into force in April 2026, firms should now be ensuring their frameworks are finalised and ready for implementation. In practice, the reforms affect several areas across compliance, operations and customer management.
Updating customer terms and conditions
Firms should ensure that their payment account terms and conditions language is aligned with the new 90 day termination notice period from 28 April 2026 onwards and consider the requirement to provide explanations for account closures.
Firms should also consider whether a re-papering exercise may be required for certain products or customer segments, particularly where existing contractual terms are inconsistent with the new rules.
Reviewing internal policies and procedures
Account termination processes are often embedded across multiple operational functions, including compliance, financial crime, risk and customer support.
As a result, firms should review their internal policies and operational procedures to ensure they:
- reflect the longer notice period;
- include processes for generating clear written explanations for account closures;
- ensure decisions are well-documented and evidence-based; and
- provide a consistent governance framework for termination decisions.
Operational clarity will be particularly important where firms rely on exceptions linked to financial crime or legal obligations.
Aligning with Consumer Duty expectations
While the rules focus on termination processes, they also intersect with broader regulatory expectations, particularly Consumer Duty.
From a Consumer Duty perspective, firms should consider whether their account closure processes are:
- fair and proportionate;
- clearly communicated; and
- unlikely to create avoidable customer harm.
Providing clear explanations and sufficient notice helps ensure customers have a realistic opportunity to transition to an alternative provider, reducing the risk of disruption to their financial activities.
Staff training and operational readiness
Account closure decisions are often implemented by operational or financial crime teams.
Firms will therefore need to ensure relevant staff understand:
- the new notice period requirements;
- when explanations must be provided;
- when regulatory exceptions may apply; and
- how to communicate termination decisions clearly to customers.
Training will also be important to ensure explanations are written in plain, understandable language, rather than relying on generic or overly legalistic wording.
Reassessing risk triggers and monitoring frameworks
Many firms rely on automated risk triggers or financial crime alerts that can ultimately lead to account closures.
Under the new framework, firms may need to reassess whether their risk thresholds, escalation processes and monitoring triggers remain appropriate, particularly where closures may lead to extended notice periods or require detailed customer explanations.
Ensuring decisions are well-justified and documented will become increasingly important, both from a regulatory perspective and in the event of customer complaints.
Preparing for April 2026
The upcoming reforms represent a shift toward greater transparency in how payment providers manage customer exits.
For firms, the key challenge will be ensuring that account closures are well-governed, clearly documented and fairly communicated.
With implementation now approaching, firms should ensure any necessary updates are completed ahead of the deadline. In particular, organisations should review and uplift the following:
- payment account contractual documentation;
- internal procedures on payment account refusal and payment account termination;
- customer communications on account refusal and termination; and
- staff training frameworks to ensure they are aligned with the new requirements.
How fscom can help
Preparing for regulatory change often requires coordinated updates across legal documentation, operational processes and compliance frameworks.
fscom supports firms by helping them:
- review and update customer terms and conditions to ensure alignment with regulatory requirements;
- develop or amend payment account termination policies and/or procedures;
- assess operational impacts across financial crime, risk and compliance; and
- implement governance and training frameworks to support compliant account termination processes.
If your firm is preparing for the upcoming account closure reforms, our team can help ensure your approach is clear, fair and regulator ready.
This post contains a general summary of advice and is not a complete or definitive statement of the law. Specific advice should be obtained where appropriate.
