Starling Bank closing down my 'Deposit' account

Landlord Discussion
1

I just received an email from Starling Bank, with whom I’ve banked for a few years, saying

“We want to remind you that holding client funds for an extended period goes against our terms and conditions which you can find here: https://www.starlingbank.com/legal/

What you need to do now:

  • Please ensure no further client funds are kept in this account
  • Please transfer out any currently held client funds within the next 90 days
  • If you have questions or need any help, please let us know in reply to this message.

Further, once these funds are withdrawn, will this account be used for any other purpose?”

and I just thought this was so odd. Why would they not allow this innocuous account which holds around £10,000 in deposits, which are then insurance backed by My Deposits? It does make me wonder if banks are under pressure from Govt behind the scenes, determined as they are to put small landlords out of business. Is the idea to force all funds to be held by central agencies? Or to get rid of deposits altogether…..

4

Just open a different account. You can use any regular account for this. There is no compulsion to tell the bank that its client funds.

5

would this not breach the terms of a personal account and require a business account to be set up?

Never really understood why anyone would do anything other than custodial…

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6

It’s against their rules, they don’t allow client money accounts for non-regulated businesses.

7

@Sian9

Unlikely as would affect bigger LLs much more than small and how would banks know whom to target? They and govt have no idea whose money is in an account only that you deposited it, nor will they have any knowledge of the insurance you say goes with it.

2. TBH I thought all (security).deposits already have to be held by one of the 3 govt approved deposit schemes? So how on earth have you got that much client £ in your account

“Your landlord must put your deposit in a government-approved tenancy deposit scheme (TDP) if you rent your home on an assured shorthold tenancy that started after 6 April 2007. In England and Wales your deposit can be registered with:

Deposit Protection Service
MyDeposits - including deposits that were held by Capita
Tenancy Deposit Scheme”

Google ‘Tenancy deposit protection’

3 Possible answer is they got fined £29m recently for lax controls so are tightening up

Extract below from FCA website

FCA fines Starling Bank £29m for failings in their financial crime systems and controls
Press Releases First published: 02/10/2024 Last updated: 05/12/2025

The FCA has fined Starling Bank Limited £28,959,426 for financial crime failings related to its financial sanctions screening. It also repeatedly breached a requirement not to open accounts for high-risk customers.

Starling grew quickly, from approximately 43,000 customers in 2017 to 3.6 million in 2023. However, measures to tackle financial crime did not keep pace with its growth.

When the FCA reviewed financial crime controls at challenger banks in 2021, it identified serious concerns with the anti-money laundering and sanctions framework in place at Starling. The bank agreed to a requirement restricting it from opening new accounts for high-risk customers until this improved. Starling failed to comply and opened over 54,000 accounts for 49,000 high-risk customers between September 2021 and November 2023.

In January 2023, Starling became aware that its automated screening system had, since 2017, only been screening customers against a fraction of the full list of those subject to financial sanctions. A subsequent internal review identified systemic issues in its financial sanctions framework. Starling has since reported multiple potential breaches of financial sanctions to the relevant authoritie

8

schemes have insured or custodial. If it’s custodial, they keep it. If it’s insured, the LL keeps it and the scheme insures against its loss.

I can’t think of a single reason why insured is of any benefit to the LL. Any interest earned belongs to the T. Maybe some LLs think they can get away with keeping this. I don’t know…

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9

Think unless tenancy agreement says differently, LLs can keep interest for an insured scheme

Certainly OR seem to suggest interest can be retained by LL using their insured scheme

See OR “A Guide to Custodial and Insured Deposit Protection Schemes A Guide to Custodial and Insured Deposit Protection Schemes “

Also TDS

“Insured schemes
Insured tenancy deposit schemes allow either the landlord or the letting agent acting on the landlord’s behalf to hold the deposit in a suitable account for the duration of the tenancy. Landlords or letting agents will pay to protect the tenancy deposit to comply with the TDP legislation, which is generally a small fixed sum. In this case, to avoid any disagreements later in the rental transaction, it is best practice to include information in the tenancy agreement about who is entitled to any interest earned during the tenancy. It’s quite usual for the interest to be retained by the landlord or their agents. If there is no mention of the interest in the tenancy agreement, then it can cause confusion. For TDS the amount registered as the tenancy deposit is the sum protected and does not include any interest accrued, so making it clear what happens to any interest will benefit all parties and reduce any concerns.

As ever, the details contained within the tenancy agreement will detail what the parties agreed to and should cover all aspects of the tenancy to prevent uncertainty.”

Best

10

… and flag to the tenant that you are profiting from their money.

I’d be very surprised if LLs typically include such a clause. If I was a T, I’d refuse to sign such an agreement unless the LL agreed to give me the interest they’d earned on my money.

It seems disingenuous at best to take such an approach.

11

@tatemono

So are you saying that OR offering such a insurance service and highlighting on their page that LLs can keep the interest is disingenuous

Must admit it wouldnt be what I’d do as seems intrinsically unfair to the tenant to take the interest resulting from their money, but as I tell people here there’s what’s legally allowable and there’s what’s fair and they aint always the same.

For the custody schemes the tenant gets interest but the rates given may be pretty low [certainly much less than a decent savings account from what I found from a quick look] so I suspect the govt approved schemes may also be making money out of the tenant by getting a higher interest rate than they pay tenants - they arent charities either. And something has to pay for the cost of their ‘free’ arbitration services.

12

nuffsed

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