The competition watchdog has stopped Lloyds Bank from forcing small business customers to open business current accounts when taking out bounce back loans.
The Competition and Markets Authority (CMA) has accused Lloyds of “bundling” loans and business current accounts for small companies.
Bundling is where a bank requires small business customers to open a current account when applying for a loan. The CMA said Lloyds had breached the undertakings in the way it set up its process for issuing bounce back loans.
In particular, SME customers using a personal current account were required by Lloyds to open a business current account as part of the application process for a loan. The CMA found around 30,000 SMEs that were using personal accounts were required by the lender to open business accounts.
The bounce back loan scheme was introduced by Rishi Sunak after the existing Coronavirus Business Interruption Loan Scheme came under fire for not being accessible by some businesses.
It offers 100 per cent government-backed loans of up to £50,000 to small businesses. Lloyds has lent over £7.5bn through the scheme.
“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,” the CMA’s Adam Land said.
The regulator said Lloyds had agreed to a number of actions and was informing customers of their options. From the middle of September, customers making new applications for loans under the scheme will have a choice to either open a business account or a fee-free loan servicing account.
A spokesperson for Lloyds 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.”