The CMA has rebuked Lloyds Banking Group after it forced small business customers to open business current accounts when applying for Bounce Back Loans, in a move known as ‘bundling’.
Bundling is where a bank requires small business customers to open a business current account (BCA) with them when applying for a loan.
According to the CMA, however, this restricts both competition and choice as customers may wish to hold an account with one provider, and use a different bank for their loan at the same time.
The CMA found that Lloyds required around 30,000 customers that were running the finances of their business through a personal current account (PCA) also to open a BCA with them in order to obtain a loan through the government’s Bounce Back Loan Scheme.
CMA put a stop to the practice after Lloyds Banking Group notified the authority that it had not complied with certain aspects of legal undertakings designed to protect customers from anti-competitive practices.
Lloyds has now agreed to a number of actions to become compliant and ensure that all affected customers are fully aware of their options going forward.
This bank must now write to customers to inform them that if they opened a BCA with Lloyds, they are 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 must also offer customers the option to switch to a fee-free loan servicing account, and ensure that any customer that retains the BCA will be reminded of these options two months prior to any newly introduced charges, as well as reporting back to the CMA on its progress.
From the middle of September, customers making new applications for loans under the Scheme will now have an upfront choice to either open a BCA 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 (COVID-19) pandemic.
“It is 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.”
He added: “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.”