THE BLOG

Difficulty Closing an Account?

27/10/2014 11:19 GMT | Updated 24/12/2014 10:59 GMT

Current regulation on accounts within the UK and possibly the world seems to be inadequate. Not only is it difficult to operate or even close an account but the documentation provided with whilst running it is often of insufficient quality to legally protect the account user or even operator. Causing problems including a large opportunity to commit fraud, identity theft or simply the account user losing touch with the account itself.

The lack of regulation in this area makes it incredibly difficult for both the operator and user of an account to maintain their records for financial purposes, but more worryingly it is even more difficult for legal purposes. If you close your account at your bank you will most likely be told your account is closed and receive a final statement on which it will have a note in the data section of the statement saying 'Account Closed' along with the date it was closed.

In many cases, although not all, you will not receive a letter with the final statement informing you the account is closed or your legal contract with the bank has finished. Without a letter with disclaimers and information on the account itself, namely when it closed, what the last payment/withdrawal to bring the balance to Zero was and that no more fees, interest or charges will be made against you or the bank because the account is officially closed, it becomes difficult if not impossible to know your legal position and even harder to prove it.

Not only is it hard to get the documentation you require when you close your account it is often even harder to close the account in the first place. Have you ever tried to close an account over the telephone for a Mobile Phone or Television Subscription? First you have to wait to get through to an account administrator, then you have to go through the process of closing the account and then there's the cost of the call. This also assumes they send you sufficient documentation for your financial or legal needs when the account is actually closed.

The problem seems to be that not only is there not good enough regulation to deal with accounts but the actual function of closing an account is difficult. It would be advisable to introduce a regulation that enables people to close an account down by registered mail within 30 days of sending a letter to the registered address of the organisation the account is held with. Along with a framework that legally protects both the account operator and user.

If the account has not been closed correctly it could be used by another party fraudulently. By having documentation proving the account is closed it protects both the account operator and user and stops fees, interest and charges accumulating. When opening an account in the same way as closing an account a letter should be sent to the account user telling them an account has opened and the legal obligations it creates for them. If it was not the person whose name is on the account who opened the account or operates it identity theft could have occurred.

By introducing a regulatory framework on opening and closing an account, including legal disclaimers it makes sure sufficient documentation is issued and stored protecting all parties involved preventing fraudulent activity. The Financial Reporting Council oversees the regulation of accounting practice within the UK through issuing Financial Reporting Standards (FRS). There does not seem to be a Financial Reporting Standard for dealing with accounts. I have therefore put together a proposal for an FRS called Dealing with Account Operations and Correspondence which you can view here.

Proposal for FRS: Dealing with Account Operations and Correspondence.

The intention of this proposal is to provide adequate documentation to keep financial records and also to provide legal disclaimers for the purposes of protecting the account operator and user in a court of law if legal action was taken against them.