What are a bank's obligations to its customers?

Relationship between the bank and the customer

The general relationship between a bank and the customer is a contractual one which begins when an account is opened. The contract specifies the obligations imposed on the bank and the customer, although some obligations may be agreed on at a later stage.

The bank becomes a debtor of the customer when the customer deposits money in a bank account. Money paid into a bank account becomes the property of the bank and bank can use the money as it sees fit. It is not obliged to tell the customer how the funds will be used, but it must repay the money on demand.

If a bank lends money to a customer, the bank becomes a creditor of the customer and the customer becomes a debtor of the bank.

Obligations of the bank

The Financial Conduct Authority’s Banking Conduct of Business Sourcebook (BCOBS) contains rules and guidance on communications with customers and financial promotions; information to be made available to customers, including statements of account; post sale requirements on prompt, efficient and fair service, moving accounts and lost and dormant accounts; unauthorised and incorrectly executed payments; and cancellation rights and their effects. Some of the main provisions of BCOBS are:

  • A bank must pay due regard to the interests of its customers and treat them fairly.
  • Banks must consider the information needs of its clients and communicate information to them in a way which is clear, fair and not misleading.
  • The customer should be told of any disadvantageous change, of a material nature, to the interest rate that applies to their account before the change comes into force.
  • Pre-sale information for products and services should generally refer to the availability of similar products and services offered by the bank that the customer may be interested in.
  • Before entering into a contract, joint account customers should be told of their rights and duties and the concept of joint and several liability.
  • Customers should be given details of the charges that apply for the normal running of an account before the contract is entered into. A warning that the charges may change in the future should also be included.
  • If a disadvantageous change to the level of charges is made, the customer should be informed at least 30 days before the change comes into force.
  • Once a contract has been entered into, a bank must provide a service which is prompt, efficient and fair. This includes requirements, for example, to have effective systems in place to allow customers to report thefts or losses, to provide a prompt and efficient service to allow customers to switch bank accounts, and to consider any apparent cases of customer financial difficulty sympathetically and positively.
  • A customer has a right to cancel a contract for a retail banking service (including a cash deposit ISA) without penalty and without giving any reason, within 14 calendar days.

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For more information on:

  • Implied terms of the contract and duties between the bank and the customer
  • Duties owed by the customer to the bank
  • Business days and hours