Small businesses forced to open fee-paying accounts to get Bounce Back Loans
Around 30,000 small company owners were forced to open fee-paying business accounts with Lloyds Bank in order to access the Government’s Covid-19 support, the competition watchdog has said.
The Competition and Markets Authority said that small business customers, mostly sole traders, who had been running their companies’ finances out of a personal account, were forced to open a business current account to get a Bounce Back Loan from the bank.
No customers are thought to have been left out of pocket as fees are only charged after 12 months.
“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,” said Adam Land, the CMA’s senior director of remedies business and financial analysis.
Lloyds has agreed to contact its business customers to tell them they can switch before it starts charging the fees.
The problems came as the bank had no processes in place to lend to businesses through personal accounts.
It decided to get them to open business accounts as the Government pressed for Bounce Back Loans to be pushed out at record speed.
“When we launched Bounce Back Loans, we asked customers using personal current accounts for their business needs to open a business bank account,” the bank said.
“This ensured quick access to the funds they needed. Any other solution would have created unnecessary delays at a critical time for businesses.”
The bank tipped off the CMA and has now agreed to a series of remedies to ensure that customers are not impacted.
Customers will be told that they are not required to keep the business current account that they were forced to open, and they can switch to a different provider at any time.
They will also be offered to switch to a fee-free loan servicing account.
Mr Land added: “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.”