What Are Your Rights if Your Bank Account Gets Frozen?

If your bank account is frozen, what are your options?

Updated: April 2, 2024
Matt Crabtree

Written By

Matt Crabtree

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In a study conducted by Resolver, a complaints resolution service, 4,300 complaints were analysed, of which 1,100 had ‘account difficulties' picked as the primary concern. 

Although up-to-date data on this issue is unavailable, it continues to be a major concern since its underlying cause has not been addressed.

The majority of victims have been clients of challenger banks, and — according to one Financial Ombudsman study — only a third of frozen accounts were actually due to fraud, so anybody might be next.

But before we go into your rights if your account gets mistakenly frozen, let's define what exactly a frozen account is.

How and why accounts get frozen

When a bank freezes your account, it prevents you from making certain withdrawals and deposits. You can still log in, but your actions will be restricted.

Paycheck and other deposits may be tracked and received easily. However, at this period, deposits are permanent. Due to the freeze, no further transfers or withdrawals may be placed.

This includes any and all recurring debits from your checking account that have been authorised in advance. There is, therefore, a considerable risk that your rent or mortgage payment, auto loan payment, or monthly subscription for your gym membership won't be processed.

When a bank freezes an account, they do so for what they consider to be a valid cause. The most common reasons include preventing more regulatory infractions, ending continuing violations of bank policy, and cutting costs. The financial institution froze the account voluntarily or in response to a court order.

Maintaining account security in this manner may be necessary at times. However, it has the potential to be quite inconvenient.

A frozen bank account prevents you from doing the following until the freeze is lifted:

  • Pay for things using your debit card's contactless feature.
  • Take cash out of an ATM.
  • Make a bank-machine withdrawal.
  • Transfer funds to other financial institutions.
  • Use a direct debit or standing order for any recurring payments.
  • Make use of the bank's banking services, either by phone or online.

Do not immediately assume your account has been frozen if you encounter issues. It's possible that it's been temporarily shut off:

  • 📖 A frozen account cannot be accessed until the underlying problem is fixed, at which point the account may be unfrozen.
  • 📖 When an account is suspended or restricted, its functionality is reduced. The account holder may be denied access to their funds or have their transaction volume restricted.
  • 📖 Once an account is closed, it cannot be reopened under any circumstances. In order to shut an account, a bank must first provide supporting documentation for the decision. When an account is closed, it stops responding to the account holder's requests. 

Are more accounts being frozen?

Challenger banking is on the rise, which may be in part to blame for more cases of unwarranted account freezing. 

Legally, the Proceeds of Crime Act of 2002 places regulatory and legal requirements on financial institutions to prohibit the use of customer accounts for terrorist financing and money laundering. The National Crime Agency (NCA) requires financial institutions to report suspicious accounts and freeze the associated cash until further investigation is complete.

Due to the potential for ‘tipping off' the account holder, which is a crime, banks are not always allowed to provide consumers with an explanation for account closures.

Possible causes include an increase in the number of institutions that use automated systems to perform anti-money-laundering and fraud-reporting procedures. System changes that are more stringent in an effort to catch money launderers and online fraudsters (on the rise) may have unintended consequences for certain users. 

Why was my account frozen?

So your account has been frozen, but it's hard to identify the reason. Here are some of the most frequent causes:

  • If your bank has reason to believe that you are engaging in illegal or questionable behaviour: Including money laundering, they have the power to suspend your account immediately and without explanation. When substantial funds are put into the account and then moved to make it seem as though they originated from a genuine source, they become suspicious. This kind of transactional activity is now under scrutiny. Large transactions into and out of your account from an unexpected source will raise red flags with the bank. This happens, for instance, when someone receives a sizable request but doesn't tell their bank manager.
  • Inactivity: The bank may freeze your account if it has been dormant for a prolonged length of time.
  • Suspicious behaviour (Learn how to protect against bank fraud): Includes sudden increases in transaction volume or purchases of potentially dangerous things like weapons, rare metals, or pricey works of art like Van Gogh. Your financial institution may suspect fraud or theft if it notices a change in your spending habits. To ensure the security of your funds, they may temporarily freeze your account. The store register or your computer screen might be where you first hear about the freeze. Most security locks can be removed with a simple phone call verifying your identity.
  • Criminal activity may benefit from big monetary transfers: Particularly those that take place across international borders. Whenever a huge sum of money is being transferred, banks keep a close eye on it, particularly when the amount is a round figure. Transfers of £4,999, £9,999, or £19,999, or sums very close to them, should raise red flags. This might also happen if deposits came from sketchy sources. If you get money from someone or some company that has been blacklisted, for instance, it might trigger an inquiry on the legitimacy of your financing.
  • If you have debts but no money to pay them: And your creditor has launched legal action against you, you may find yourself in this situation. Your bank account may be stopped if the creditor obtains a debt order. The financial institution may then have direct debtor communication. The length of time a bank may freeze an account under certain conditions varies from case to case. Instead of days, it may take weeks.
  • Accidentally: Whether by accident or design, automated systems have locked the accounts of some individuals who were only attempting to transfer money to loved ones. 

Learn about the role of AI and Machine Learning in Banking.

I can't access my account; what should I do?

Depending on the cause of the account freeze, several solutions may be necessary. However, here are commonly recommended steps:

#1 Pinpoint why you’ve been frozen

If you can still access your bank account online, go over your recent transactions, mark anything that seems suspicious, and make a note of their origin.

#2 Contact your bank

If you want a more practical look into your account, you can ask to talk to the bank's fraud team. Inquire whether a particular exchange may be to blame, and wait for an answer. Don't wait to file a formal complaint if the bank still won't assist.

#3 Contact the Financial Ombudsman Service (FOS)

You must wait eight weeks after filing a complaint with your bank before taking it to FOS unless you get a stalemate letter. This is true whether you are dissatisfied with the answer given or have received no response at all.

#4 Get a new account as quickly as possible 

Even if your account is frozen, utilising the Current Account Switch Service to switch your current account is a breeze. Learn how to switch accounts.

Make sure any future deposits are made to your new bank account and inquire as to whether or not you need to re-establish any recurring payments.

If you get benefits, inquire as to whether or not the company would transfer the funds from the frozen account to a new one. The bank technically cannot prohibit you from withdrawing your benefit money, since it is your legal right to direct its use.

However, there are particular steps you may do after you learn the reason why your account was frozen.

If you’ve been frozen for security purposes

Be forthright and helpful in your approach. In most cases, the bank's fraud department will remove the hold after speaking with you and re-verifying your identification.

The bank will instruct you on how to file a complaint of identity theft or account hacking. Always double-check your most recent bank statements to verify all of your transactions.

If money in your account was withheld because of a debt

A valid court order is required before any funds may be seized from a bank account. The amount of the claim is the maximum amount that may be seized.

If your debt is larger than the amount currently in your account, the creditor has the right to close the account in its entirety. Debts may include but are not limited to loans, tax arrears, child support payments, and alimony payments from a previous marriage.

When you have a creditor freeze your bank account owing to debt or a judgement, the first step to follow is to identify the creditor. The bank owes you a notice that includes details on the debt and the identity of the plaintiff in the civil case. Seeking legal counsel and working out a new payment plan with the creditor via instalments is a good idea in this situation.

If inactivity caused your account to be frozen

Get in touch with the bank and ask how to get the account back online.

How long until it's all sorted out?

How swiftly the procedure is handled by the bank and whether or not the NCA decides to investigate are the two main factors in this. The bank must wait seven business days for a response (during which time it will be unable to conduct the transactions).

In the absence of a response, the Bank is presumed to have permission to proceed with the transaction. If the NCA denies permission to conduct an investigation, the maximum time frame is 42 days (7 business days + 31 nonwork days).

The bank will often unfreeze the account automatically when the period of time has passed. If the account is still frozen after 42 days, the police will need to petition the court for an order (either to prolong the investigation time or to keep the account frozen).

If there is a court order, you will be aware of the reasoning behind it and have the opportunity to file an appeal.

After waiting, what options do I have to have this fixed?

The bank may be in violation of its contractual responsibilities to you if it continues to freeze your account beyond 42 days for no good reason other than an outstanding debt or an NCA investigation supported by a court order.

However, nowadays, after reporting suspicious behaviour, most banks immediately terminate customer accounts, even if the inquiry turns up nothing.

There is currently no legal appeal against a bank's decision to terminate a client's bank account unless the consumer can establish they have been discriminated against under the Equality Act of 2010. In most cases, you will get a 60-day warning before your account is closed.

What banks don’t freeze accounts?

All financial institutions maintain the right to place a hold on your account for any of the aforementioned reasons.

How to avoid account freezes

  1. Do not go a long time without logging into your account (more than 12 months).
  2. Do not ignore your financial obligations.
  3. Tell the management of the bank account where the substantial deposit will be made that you anticipate to receive money through an inheritance, the sale of a home, or any other source.  
  4. If you see any questionable activity on your account, please let the bank know.
  5. If your identity or identification card has been taken, contact your bank immediately.

Your rights after your bank account has been frozen explained: The Verdict

The Financial Ombudsman Service (FOS) may assess whether you are entitled to compensation for financial losses if you believe you have been handled unjustly.

The FOS has made it plain that banks may be held accountable where account closure leads to the client failing to pay a check, direct debit, or standing payment. 

If your bank account is blocked and you fail to make a payment or pay interest because of this, the bank will be responsible for these costs as well.

Finally, the Ombudsman may require your bank to refund any direct expenses paid or compensation for distress even if your account being frozen results in indirect loss such as harm to your reputation or unfavourable information on your credit file.

Related Guides:

Your rights after your bank account has been frozen — FAQs

My bank account is frozen, how do I get my money back?

Does a bank need your approval to freeze my account?

How can I make a formal request to have my bank account unfrozen?

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