Customers who were denied mortgages, left to fend off debt collectors and forced to turn to food banks after NatWest closed their accounts have won a series of compensation payouts.
Consumers have won claims of up to £500 from the taxpayer-owned bank, which has been heavily criticised for its strict anti-money laundering ‘de-risking’ safeguards. They have resulted in thousands of people being unable to access money they rely on for day-to-day spending and emergency cash.
One woman was unable to remortgage her buy-to-let properties and left owing thousands in broker and legal fees, after NatWest closed her account and placed an unwarranted black mark on her credit file. This resulted in two mortgage offers being withdrawn.
NatWest froze the account after the woman paid in a cheque she had received from a relative at a funeral, which was flagged as counterfeit. Consequently, the Financial Ombudsman Service (FOS), the national arbiter of money disputes, ruled that the bank had not carried out a sufficiently thorough investigation and that its actions were based on suspicion rather than proof. In July, the FOS ordered the bank to remove the black mark and pay £500 compensation, plus interest.
Victims forced to use food banks
Another customer who relied on a £5,000 overdraft won a £200 payout in June, after NatWest closed his account and refused to allow him to set up a payment plan to cover what he owed, instead passing his details to debt collectors. The ombudsman ruled the bank had acted ‘unreasonably’, resulting in the customer falling into default.
One of the victims of the bank account closures, who had lost his job during the pandemic, said he was forced to borrow money from friends and turn to food banks to get by, following ‘unnecessary delays’ which meant that the bank did not release his funds for three months. According to the ombudsman, the delay also resulted in the customer’s house purchase falling through, for which the bank was ordered to pay out £250 in May.
In other cases, a man was unable to buy food after an account closure because NatWest refused to let him withdraw £100, while a business owner said he lost £30,000 in trade after his account was terminated. This meant he was unable to collect payments, pay bills or taxes and was hit with charges when his direct debits did not go through.
In all cases, the ombudsman said NatWest was entitled to shut down the accounts, but stated the bank had shown customers a poor standard of service in the aftermath.
Accounts closed only after ‘careful deliberation’
Last month the Treasury Committee, an influential group of MPs, asked the City watchdog to consider whether customers had been treated fairly. The watchdog also said it would examine whether artificially intelligent security systems at banks were too rigorous.
The committee became concerned after reports that the bank had frozen the accounts of vulnerable customers ‘without good reason’. NatWest faces criminal proceedings for allegedly failing to comply with money laundering rules between 2011 and 2016. The bank said it had invested £700m in anti-money laundering protections in the past five years, with another £1bn planned over the next five years, and that it was considering the charges, which will be heard in court in September.
All banks reserve the right to terminate services if they suspect accounts are being used for any illegal activity. They will often refuse to justify their actions, in case they tip off genuine criminals.
A spokesman for NatWest said they have clear legal and regulatory responsibilities to protect their customers and accounts from fraud and the proceeds of crime. Accordingly, they take these responsibilities very seriously and will take action if they detect any activity that falls outside those controls. A decision to close a customer’s account is only reached after very careful deliberation, he added.