HM Treasury Call for Evidence on the Payment Services Regulations 2017 concluded

HM Treasury has concluded that the existing regulations governing the termination of payment service contracts are deficient at protecting payment service users, following a Call for Evidence that concluded in April 2023. The finding is set out in the explanatory memorandum to the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025, which amend regulation 51 of the Payment Services Regulations 2017 (PSRs) and regulations 25 and 26 of the Payment Accounts Regulations 2015 (PARs)¹.

The instrument extends the minimum notice period for terminating a payment services framework contract concluded for an indefinite period, such as a bank account, from two months to at least 90 days. It also requires providers to give a sufficiently detailed and specific explanation of the reasons for termination, and to inform users of any right they may have to complain to the Financial Ombudsman Service¹. The changes apply to contracts entered into on or after 28th April 2026, when the instrument comes into force, and do not change the requirements for contracts entered into before that date, which are restated in new regulation 51A¹.

The memorandum states that notice periods are currently inconsistent, with some users receiving two months and others less depending on their provider, and that even two months is considered insufficient for users to manage the impacts of a termination¹. It says there is no existing obligation in the PSRs requiring providers to give an explanation for a termination, and that users are unlikely to understand the motives behind it¹. The government expects the legislation to cost £76.1m across a ten-year appraisal period, and does not anticipate any costs to users of payment services, whether individual consumers, businesses or charities¹. It has not exempted small and micro businesses from the requirements, and the instrument does not include a statutory review clause¹.

The instrument sets out exceptions. No termination notice, and therefore no minimum notice period, is needed where a provider is required to apply customer due diligence measures under regulation 27 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and cannot apply them as regulation 28 requires¹. An additional exception was added to the draft for certain public order and harassment offences, and another where a user provided incorrect information before or when entering into the contract and the provider would not have entered into it had the correct information been given¹. The threshold for departing from the requirements in cases of serious crime, as defined by reference to the Serious Crime Act 2007, was amended to "reasonable grounds to suspect"¹. Where the user is not a consumer, a micro-enterprise or a charity, the parties may still agree that provisions of Part 6 of the PSRs do not apply, including the new termination requirements¹.

Why it matters for households

The changes affect people and businesses whose payment services framework contracts are entered into on or after 28th April 2026, including current accounts and other payment services provided under indefinite contracts. For those contracts, a provider wanting to terminate must give at least 90 days' notice rather than the two months currently set out in regulation 51(4), must explain the reasons in enough detail for the user to understand the decision, and must say whether the user can complain to the Financial Ombudsman Service¹. Contracts entered into before that date keep the existing requirements, restated in new regulation 51A¹. The amendments to the PARs bring the notice period and reasons requirements for basic bank accounts into line with the PSRs¹. The government says it does not expect users to bear any costs from the instrument¹.

What happens next

The instrument comes into force on 28th April 2026¹. The Financial Conduct Authority will update the guidance on contract terminations in its Payment Services and Electronic Money Approach Document to reflect the legislative changes¹. The memorandum records that HM Treasury published findings from the Call for Evidence and proposed reforms in a policy statement in July 2023, with a further statement in October, and published a draft of the instrument for technical checks in March 2024, receiving responses from financial services trade associations and individual firms¹.