Lloyds rapped for forcing Bounce Back Loan users to open business accounts
The banking giant – including Lloyds Bank and Bank of Scotland – was found to be ‘bundling’ these customers, in breach of legal undertakings to protect consumers from anti-competitive practices.
The Competition and Markets Authority (CMA) said it was notified by Lloyds Banking Group about the non-compliance and it found around 30,000 customers from 8 May onwards were forced to open a business account after applying for a Bounce Back Loan through the bank.
Bounce Back Loans enable small businesses to apply for up to £50,000 from the government if they’re struggling due to the coronavirus crisis.
While the CMA noted that Lloyds’ new business current account customers wouldn’t initially be charged, the move restricted competition and limited the choice for customers who may want to hold an account with one provider while they use another bank for their loan.
It said Lloyds agreed to a number of actions to become compliant and make sure all affected customers are made aware of their options. This includes writing to customers during September to inform them that:
- If they opened a business current account with Lloyds, they’re not required to maintain this account for the purposes of a loan under the Bounce Back Loan Scheme, and can choose to switch to another provider at any time while keeping the loan
- They will be offered the option to switch to a fee-free loan servicing account.
Further, from mid-September, customers making new applications for loans under the scheme will have an upfront choice to either open a business current account or a fee-free loan servicing account.
Adam Land, CMA senior director of remedies business and financial analysis, said: “The Bounce Back Loans Scheme is a key part of the support provided by government to small businesses during the coronavirus pandemic. It’s important that signatories to our undertakings participating in this Scheme do not restrict the choices of small businesses by bundling loans and business current accounts.
“By forcing businesses to open current accounts as a pre-condition to access this Scheme, Lloyds breached the CMA undertakings it signed, reduced choice and put their customers at risk of being unnecessarily charged.
“Following our action, Lloyds is taking the steps necessary to become compliant and will shortly be contacting existing customers to inform them of their rights.”
What does Lloyds say?
Statistics reveal it has lent over £7.5bn through the Bounce Back Loan Scheme, with the majority of applications approved within a working day.
A Lloyds Banking Group spokesperson, said: “When we launched Bounce Back Loans, we asked customers using personal current accounts for their business needs to open a business bank account. This ensured quick access to the funds they needed. Any other solution would have created unnecessary delays at a critical time for businesses.
“All business current accounts benefit from 12 months free banking, alongside other business specific benefits. We proactively informed the CMA of our approach and are now writing to our customers to reiterate that they can transfer their account to a free loan servicing account at any time, should they wish to do so.”