Terminating payment services: what providers need to know about stronger consumer protection regulations

Overview

The Payment Services and Payment Accounts (Contract Termination) (Amendment) Regulations 2025 (the Regulations) aim to enhance consumer protections against termination of payment service contracts. They are due to come into force on 28 April 2026.

The Regulations apply to credit institutions as well as payment institutions and E-Money Institutions, so online payment providers / processors fall within the scope of the Regulations.

The FCA will update its Payment Services and Electronic Money Approach Document to deal with the Regulations. At the time of writing, this has not been done.

 

Key Regulatory Changes

The Regulations update both the Payment Accounts Regulations 2015 (SI 2015/2038) (the 2015 Regulations) and the Payment Services Regulations 2017 (SI 2017/752) (the 2017 Regulations), with the key regulatory change being that a notice of termination for the termination of indefinite period contracts must be provided at least 90 days before the termination is due to take effect (Regulation 51B).

Contracts for an Indefinite Period

The Regulations distinguish between framework contracts entered into for an indefinite period and before 28 April 2026 and those entered into on or after 28 April 2026.

There is no definition of "indefinite period" in either the new Regulations or the 2017 Regulations and therefore the appropriate approach is to consider what is meant by the plain meaning of those words. In essence, a contract for an indefinite period would be a contract that is not a fixed term and therefore can be ended on notice or is a fixed term, but the fixed term is automatically renewable.

Extended Notice Period

The Regulations amend Regulation 51 in Part 6 of the 2017 Regulations, which currently states as follows (with the most relevant subsection for payment service providers highlighted in bold):

"(1) The payment service user may terminate the framework contract at any time unless the parties have agreed on a period of notice not exceeding one month.

(2) Any charges for the termination of the contract must reasonably correspond to the actual costs to the payment service provider of termination.

(3) The payment service provider may not charge the payment service user for the termination of a framework contract after the expiry of 6 months of the contract.

(4) The payment service provider may terminate a framework contract concluded for an indefinite period by giving at least two months' notice, if the contract so provides.

(5) Notice of termination given in accordance with paragraph (4) must be provided in the same way as information is required by regulation 55(1) (communication of information) to be provided or made available.

(6) Where charges for the payment service are levied on a regular basis, such charges must be apportioned up until the time of the termination of the contract and any charges paid in advance must be reimbursed proportionally.

(7) This regulation does not affect any right of a party to the framework contract to treat it, in accordance with the general law of contract, as unenforceable, void or discharged."

Under the new Regulations, the position in relation to termination of contracts entered on or after 28 April 2026 provides (at Regulation 51B) for a notice of termination to be provided for the termination of indefinite period contracts giving at least 90 days' notice. These provisions are outlined in Regulation 51B(2)-(3):

"(2) The notice of termination must—

(a) contain an explanation of the reasons for termination which is sufficiently detailed and specific to enable the payment service user to understand why the framework contract is being terminated;

(b) be provided in the same way as information is required by regulation 55(1) (communication of information) to be provided or made available;

(c) advise the payment service user of—

(i) how a complaint against the termination may be made to the payment service provider; and

(ii) any right the payment service user has to make a complaint to the ombudsman scheme established under Part 16 of the 2000 Act (the ombudsman scheme)."

(3) The notice of termination must be provided at least 90 days before the termination is to take effect.

There are exceptions to these requirements which are set out in Regulations 51C and D and these relate to money laundering, terrorist funding, immigration, and public order issues. None of these exceptions cover issues such as the management of credit and reputational risk.

Corporate Opt-Out Provisions

Helpfully, Regulation 40 of the 2017 Regulations sets out the corporate opt-out provisions by which the parties to any payment services contract can agree for the provisions of Part 6 to not apply. Where there is a corporate opt-out available, the provisions of the new Regulations are excluded and the application of the corporate opt-out is the most obvious method of diminishing the impact of the Regulations on relevant merchants.

 

Further Guidance and Points of Interest

There is no requirement to incorporate the provisions of the Regulations into a framework contract, although you might consider it an appropriate step to make reference to the Regulations in your contract as you will be bound by the terms of the Regulations regardless.

One point of interest that arises is whether amendments to the terms of a framework contract (for example, pricing amendments) might be impacted by the Regulations. Such amendments are currently governed by Regulation 50 of the 2017 Regulations. As a reminder, Regulation 50 states that payment service providers must provide users with no less than two months' notice of proposed amendments to a framework contract. Where the user does not respond to the notice, they are deemed to have accepted the changes. Should the user wish to terminate the contract, they may do so without any charge at any time before the changes take effect (i.e. within the two-month period). Regulation 50 is not amended by the incoming Regulations, so the position remains unchanged.

If you wish to discuss your organisation's approach in respect of the incoming Regulations, please do not hesitate to contact us.