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NatWest forced to compensate account closure victims

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Consumers who were denied mortgages, left at the mercy of debt collectors and forced to turn to food banks after NatWest shut down their accounts have won a string of compensation payouts.

Customers have won claims of up to £500 from the taxpayer-owned bank, which has recently come under fire for its stringent anti-money laundering “de-risking” safeguards. They have resulted in thousands of people being blocked from money they rely on for day-to-day spending as well as emergency cash.

One woman was unable to remortgage her buy-to-let properties and left thousands out of pocket in broker and legal fees, after NatWest terminated her account and “unfairly” placed a black mark on her credit file. It resulted in two mortgage offers being withdrawn.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 it flagged as counterfeit. However, the Financial Ombudsman Service, the national arbiter of money disputes, ruled NatWest had not carried out a sufficient investigation and that its actions were based on suspicion rather than proof. In July it ordered the bank to remove the black mark and pay £500 in compensation, plus interest.

Another customer who was “dependent” on a £5,000 overdraft won a £200 payout in June, after NatWest shut his account and refused to let him set up a payment plan to cover what he owed – and instead passed his details to debt collectors. The ombudsman said the bank had been “unreasonable” and that its actions had resulted in the customer falling into default.

One of the bank account closure victims, who had lost his job during the pandemic, said he was forced to turn to food banks and borrow money from friends to get by, after “unnecessary delays” meant NatWest did not release his funds for three months. The delay also resulted in the customer’s house purchase falling through, according to the ombudsman, which ordered the bank to pay out £250 in May.

In other cases a man was unable to buy food following an account closure because NatWest refused to let him withdraw £100, while a business owner said he lost out on £30,000 in trade after his account was terminated. It 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 the cases, the ombudsman said NatWest was within its rights to shut down the accounts, but said the bank had treated customers poorly in the aftermath.

Last month the Treasury Committee, an influential group of MPs, asked the City watchdog to look at whether customers had been treated fairly. It said it would also examine whether artificially intelligent security systems at banks were too stringent.

It became concerned following reports from NatWest, which faces criminal proceedings for allegedly failing to adhere to money laundering rules between 2011 and 2016, had frozen the accounts of vulnerable customers “without good reason”. 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 illicit activity. They will often refuse to justify their actions, for fear of tipping off genuine criminals.

A NatWest spokesman said: “We have clear legal and regulatory responsibilities to protect our customers and accounts from fraud and the proceeds of crime. We take these responsibilities very seriously and will act if we detect any activity that falls outside those controls. A decision to close a customer’s account is only reached after very careful consideration.”

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