Lloyds Bank has been given a slap on the wrist for forcing small businesses who were desperate for an emergency coronavirus loan to open an account with them.
The high street lender was rebuked by the Competition and Markets Authority (CMA) for ‘bundling’ – making 30,000 customers open a fee-paying account when all they wanted was a Government-backed Bounce Back loan.
Lloyds will now have to write to these customers, telling them that they can switch their account to a new provider while keeping the loan or offering them a fee-free account to service the loan.
Lloyds was rebuked by the Competition and Markets Authority for ‘bundling’ – making 30,000 customers open a fee-paying account when all they wanted was a Bounce Back loan
The ruling is a setback for chief executive Antonio Horta-Osorio as his tenure comes to an end. The Portuguese 56-year-old is leaving next year after a decade in charge in which he has been paid £56million.
Adam Land, senior director at the CMA, said: ‘By forcing businesses to open current accounts as a pre-condition to access this [Bounce Back] scheme, Lloyds breached the CMA undertakings it signed, reduced choice and put their customers at risk of being unnecessarily charged.’
After the Government launched its Bounce Back loans in May, more than 1.4m businesses applied for cash to help them make ends meet.
The loans charged low interest and are 100 per cent guaranteed by the Government, meaning the banks cannot lose out.
Thousands of firms which applied were run by owners without a formal business account, who had previously run their business through a Lloyds personal account.
This is not strictly allowed under the terms and conditions of a personal account but, since many firms were under pressure, most banks turned a blind eye.
However, Lloyds had no way to make a business loan to a personal account holder. So, to get money swiftly out of the door to desperate businesses, it forced them to open a business account.
Though Lloyds did not charge for this business account for 12 months, any customer who kept it for longer than that would have ended up paying £7 a month.
The bank was aware that this may have breached the CMA’s rules, and referred itself immediately to the watchdog.
Lloyds said: ‘Any other solution would have created unnecessary delays at a critical time. All business current accounts benefit from 12 months free banking.
‘We proactively informed the CMA of our approach and are now writing to customers to reiterate that they can transfer their account to a free loan servicing account’
Since May, Lloyds has handed out more than 250,000 Bounce Back loans, worth more than £7.5billion. The entire scheme has so far lent £35.5billion to 1.2m small businesses.