UK payment services: final rules limiting rights for PSPs to exit customer relationships laid before Parliament

The final draft regulations amend the PSRs to increase from 2 months to 90 days the minimum notice period that PSPs must give customers when terminating a framework contract concluded for an indefinite period. These requirements only apply to framework contracts entered into on or after 28 April 2026. While there are some exceptions, PSPs will also be required to give customers a ‘sufficiently detailed and specific’ explanation of the reasons for termination so their customer understands why their contract is being terminated. 

Corresponding changes are also being made to the PARs so that the new rules will also apply to the refusal of applications for and termination of basic bank accounts. 

The changes will require several decisions to be made from an operational standpoint, and leave certain points of uncertainty unresolved. 

What should banks and other PSPs be thinking about now? 

While the new termination rules will only apply to framework contracts entered into on or after 28 April 2026, PSPs should now be considering their implementation options for both existing and new contracts with a view to ensuring an efficient and effective approach to compliance by the statutory deadline. 

Some potential operational impacts to consider include: 

• Should you carry out a repapering exercise to move to the new requirements for both existing and new framework contracts - either now or from next April? Or should you maintain both the pre- and post-April 2026 termination provisions in two sets of framework contracts going forward for existing and new customers (or until a larger contractual update offers the chance to consolidate the two)? (If you are already planning a notice of variation (NoV) in relation to your current framework contracts, now might be the time to consider the above exercise for those contracts.) 
• If you maintain two sets of framework contracts, will you follow a “highest common denominator approach” operationally regardless of which set of terms you are terminating under? If so, do your current terms cater for the proposed exemptions in which no notice is permitted under the new requirements? 
• What does “sufficiently detailed and specific” mean? PSPs will need to give thought to how much information to provide customers about the reason for termination. 

Brief recap of background to the new termination rules for PSPs 

Following a call for evidence, in a July 2023 policy statement the previous UK government committed to changing the requirements on PSPs when terminating payment service contracts. A further statement on next steps for implementation of the changes was published in October 2023. This was followed by HMT’s consultation on draft amending regulations – the Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations (the Amending Regulations) - in March 2024. A policy note on the Amending Regulations was also published. 

The draft Amending Regulations set out the detail of the proposed changes to the rules relating to PSPs’ termination of framework contracts concluded for an indefinite period. Stakeholders were asked to provide any technical comments on the proposed SI. Take a look at our previous article on the March 2024 draft Amending Regulations for more detail. 

The final draft Amending Regulations have now been published and were laid before Parliament on 28 April 2025. They are accompanied by a draft explanatory memorandum. 

What are the key changes from the March 2024 draft regulations? 

Key changes from the March 2024 draft include: 

• Amendments to specific exception where the payment service is used for serious crime: Previously, HMT proposed that the new rules would not apply where a PSP has a “reasonable belief” that a payment service is being used or is likely to be used in connection with a serious crime (as defined by reference to the Serious Crime Act 2007). In response to industry feedback that this threshold would be difficult to meet given the thresholds found in financial crime legislation, HMT has now amended this threshold to “reasonable grounds to suspect”. In addition, HMT has clarified the drafting so that this exception will also apply where a PSP finds that a service has been used to facilitate a serious crime (not just that it is or is likely to be used to do that). 
• New specific exception to 90 days’ notice requirement for public order and harassment offences: An exception to the requirement to give 90 days’ notice has been added in relation to certain public order and harassment offences – again, following industry feedback. The PSP will, however, be required to provide a termination notice ‘without delay’ following its decision to terminate the framework contract. 

As with the main obligation to provide a termination notice, there is a general exception to the effect that any conflict between this requirement and another legal requirement must be resolved in favour of that other requirement ‘to the extent of the conflict’. In its March 2024 policy note to the previous draft of the Amending Regulations, HMT stated that the reference to ‘legal requirements’ is purposefully broad because of the wide range of legal obligations PSPs face and need to balance and to ensure that the provision is future-proofed. HMT also clarified previously that a legal requirement would, for example, extend to regulatory requirements but not to mere guidance which is not legally binding. 

• New specific exception to 90 days’ notice requirement where customer provides incorrect information: There is also a new exception to the 90 days’ notice requirement to cover the situation where: (1) a customer provided incorrect information before, or when entering into, the framework contract; and (2) had the correct information been provided, the PSP would not have entered into the contract. As above, the PSP must nonetheless provide a termination notice ‘without delay’ following its decision to terminate (subject to the general exception for other legal requirements). 
• Expansion of anti-avoidance provision: In the March 2024 draft Amending Regulations, HMT introduced a prohibition on PSPs ‘contracting-out’ of the new requirements to provide 90 days’ notice and a reason for termination by agreeing with customers that the new termination requirements do not apply. This prohibition has been expanded to also cover the requirement to provide a termination notice under the two new specific exceptions outlined above. As highlighted in our previous article, the existing corporate opt-out in regulation 40(7) PSRs will, however, still apply. This means that PSPs may agree with customers other than consumers, micro-enterprises and small charities that these new requirements won’t apply. 
• Amendments to make the new termination requirements pre-contract information: Schedule 4 to the PSRs sets out information which must be provided to a payment service user before they enter into a framework contract (or immediately after if that is not possible). HMT has amended paragraph 6(c) of Schedule 4 to provide that “any terms in respect of termination required by or permitted under regulations 51 to 51D” (ie the new termination requirements) should be provided as part of this pre-contract information. Many PSPs will provide this information to customers as part of their terms. This will require PSPs to update their terms to reflect the new requirements. 

Remaining areas of uncertainty 

Some areas of uncertainty remain that will require PSPs to consider their approach when reviewing their policies and procedures. For example, as summarised above the PSRs are being amended to reflect the approach taken to date in the PARs regulations 25 and 26 in enabling immediate termination where the PSP considers that a payment service user’s abusive conduct amounts to an offence under certain specified public order statutes. PSPs will need to consider how certain they are that the conduct meets the evidential standard for the public order offences listed in the final draft Amending Regulations. 

How can Hogan Lovells help? 

The combination of our legal and consulting teams provides you with a full range of services, and clear guidance on how the solutions can be applied within the business. If you would like to discuss the impact of the changes being introduced under the Amending Regulations on your framework contracts or have questions in relation to any other payments related issues, please reach out to any of the people listed in this article or your usual Hogan Lovells contact.

Authored by Charles Elliott, Stephen Timbrell, Ann Doan, Virginia Montgomery and Daniela Vella.