The Critique by Charity Commission on the Debanking of Not-For-Profit Organizations
A recent survey conducted by the Charity Commission, a watchdog organization in England and Wales, has revealed that 42 percent of not-for-profit organizations have experienced banking problems. These issues include accounts being frozen without warning and difficulty opening new accounts. The chief executive of the Charity Commission, Helen Stephenson, criticized banks for their actions, stating that many organizations had their bank accounts shut down with no notice or explanation.
According to the survey, debanking, or the closure of accounts, occurs most frequently with Barclays. Stephenson called on high street banks to prioritize the needs of charities and make their business models work for these organizations. Barclays responded by acknowledging the challenges faced by charities in providing necessary information but emphasized that account closures are only used as a last resort after multiple attempts to communicate with the organizations.
This is not the first time that Stephenson has called on banks to provide better support for the charity sector. In November 2023, she and other charity regulator chiefs signed a letter urging banks to take urgent action to assist struggling charities. The letter highlighted that not-for-profits are on the front line of the current cost-of-living crisis and are facing financial difficulties themselves.
The regulators expressed their concerns about poor customer service, administrative delays, and the lack of online banking systems designed to meet the unique needs of charities. While they are working to provide information to help charities understand bank requirements, they stressed that banks need to improve training and customer service to address the challenges faced by charities.
The issue of debanking gained attention after former politician and GB News host Nigel Farage had his account closed by Coutts, a private bank. An investigation into account closures at Coutts found no evidence of discrimination based on political views or affiliations. Farage criticized the report, claiming it did not accurately reflect the reasons for his account closure.
In February, the Treasury Committee revealed that banks had closed 140,000 accounts held by small businesses in the past year. Reasons for closures included account inactivity, failure to provide updated information, and suspicion of fraud or financial crime. The committee expressed concern about banks’ readiness to close accounts with little notice.
The critique by the Charity Commission sheds light on the challenges faced by not-for-profit organizations when it comes to banking services. The closure of accounts without warning and the difficulties in opening new accounts can have severe consequences for these organizations, which rely on banking services to carry out their charitable work. Banks need to prioritize better support and customer service for charities, ensuring that their business models align with the needs of these organizations. Only through improved collaboration between banks and charities can the challenges faced by the sector be effectively addressed.
