CMA Stops Lloyds ‘Bundling’ Business Accounts With Loans

UK regulator, the CMA has stopped Lloyds Banking Group forcing small business customers to open business current accounts when taking out Bounce Back Loans. Lloyds (Lloyds Banking Group) refers to the two brands within the group, Lloyds, and Bank of Scotland.

September 8, 2020 | AtoZ Markets – The Competition and Markets Authority (CMA) has stopped Lloyds Banking Group forcing small business customers to open business current accounts when taking out Bounce Back Loans.

In terms of the background details, around 30,000 small business customers were instructed by Bank of Scotland and Lloyds Bank, which are both parts of the Group, to apply for a business current account in order to access the government-backed scheme.

CMA says “bundling” is unfair

But the banking watchdog has argued that this process – known as “bundling” – is unfair, as it says it limits choice for customers. “Bundling” is where a bank requires small business customers to open a business current account with it when applying for a loan.

The CMA says this restricts competition and limits choice because customers may want to hold an account with one provider while using a different bank for their loan. Crucially, you also don’t need a business account to apply for a bounce bank loan.

As part of their business current accounts, both Bank of Scotland and Lloyds Bank charges customers a monthly fee of £7, plus 85p for every cheque or payment made into the account.

The banks also charge £1 for every £100 in cash deposits up to £1,500 a month, or 90p per £100 for anything over this amount.

As these fees don’t kick in for 12 months, no new customers would have been charged this year as the breach only took place from May 8 onwards.

But the CMA argues that some customers may keep their account open for longer than the fee-free period and will therefore be stung. The Group says it will now write to affected customers to offer them the choice of switching to a fee-free loans servicing account.

Lloyds will write to customers during September to sort out this issue

Meanwhile, from the middle of September, anyone applying for a new bounce back loan through the bank will have the choice to do so through a business account or a loan servicing account.

The banks said they would have contacted customers regardless before any charges kicked in, usually around two months before. Bank of Scotland and Lloyds estimate that they have approved bounce bank loans for 250,000 customers; of which 220,000 already had a business account with the banks. A spokesperson for Lloyds Banking Group 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. 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.”

Adam Land, CMA senior director of remedies business and financial analysis, said: “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.”

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