New UK Legislation Boosts Consumer Rights in Payment Services

In a move to bolster consumer rights, the UK government has introduced the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025. This new legislation, effective from April 28, 2026, aims to provide enhanced protection for users of payment services, such as bank accounts, by amending the existing Payment Services Regulations 2017 and Payment Accounts Regulations 2015.

Key Changes and Objectives

1. Extended Notice Period: The legislation increases the minimum notice period for contract terminations from two months to 90 days. This change aims to give consumers and businesses more time to adjust and find alternative service providers if their current payment service provider (PSP) decides to terminate their contract.

2. Clearer Termination Reasons: PSPs will now be required to provide a detailed and specific explanation for contract terminations. This is designed to help users understand the reasons behind the termination, fostering greater transparency and enabling users to challenge decisions if needed.

3. Right to Complain: Users will be informed of their right to complain to the Financial Ombudsman Service if they believe the termination of their contract is unjustified.

These changes come after a thorough review by HM Treasury, which found the previous regulations inadequate in safeguarding consumer interests. The government engaged with the financial services sector and examined findings from a Call for Evidence conducted in 2023, highlighting inconsistencies and ambiguities in the current system.

Legislative Background

This legislation is part of the UK’s broader effort to refine its financial regulations post-Brexit, utilizing powers under the Financial Services and Markets Act 2023. It addresses gaps in the existing framework by strengthening consumer protections and aligning notice periods and termination explanations with current expectations.

Impact and Industry Feedback

The legislation is expected to impose costs of approximately £76.1 million on PSPs over a ten-year period, primarily due to adjustments in policies and systems. However, these changes are anticipated to bring significant non-monetised benefits to consumers, such as improved experiences during contract terminations and enhanced confidence in managing their financial affairs.

The government has consulted extensively with stakeholders, including financial services trade associations, to ensure the new regulations are practical and effective. Feedback has led to some adjustments, such as modifying the grounds for exceptions related to serious crimes and public order issues, ensuring that PSPs can protect staff from abusive customers.

Future Monitoring

The Financial Conduct Authority (FCA) will oversee compliance with these new requirements, ensuring that PSPs adhere to the updated regulations. While there is no statutory review clause, the legislation will be part of ongoing assessments as the UK continues to tailor its financial regulatory framework.

This legislative update marks a significant step forward in consumer protection within the UK’s payment services sector, aiming to create a fairer and more transparent environment for all users.