The UK Competition and Markets Authority (CMA) has ordered Lloyds Banking Group to stop forcing small business customers taking out Bounce Back Loans, to open business current accounts, as well.
Lloyds Regulating Itself
“Bundling” stands as a practice were a bank mandates small business customers to open up a business current account (BCA) with said bank should they wish to apply for a loan. This, in turn, limits choice and restrict competition, as the customers in question may wish to use a different bank for a loan than what they do for their accounts.
This action came as a result of Lloyds Banking Group (Lloyds), consisting of the Bank of Scotland and Lloyds Bank, notifying the CMA that they had not complied with specified legal undertakings. These undertakings were designed to protect the UK’s customers from anti-competitive practices.
The Situation At Hand
It was found by the CMA that Lloyds had, in fact, breached these undertaking, doing so from the 8th of May, 2020 and onwards. Lloyds had mandated about 30,00 customers that had been running their finances through their personal current account (PCA) to open another BCA with them. This was done in order to allow these customers to gain a loan through the Bounce Back Loan Scheme the government provides. This scheme, in and of itself, had been launched with the intent to help businesses gain access to quick finances in order to combat the economic ramifications of the COVID-19 pandemic.
The CMA did note, however, that these new BCA customers of Lloyds had not originally been charged for it. Even so, it further noted that these small business customers might have kept their accounts open for longer than the fee-free periods. This would result in charges against the account that may not have been suitable for the customer’s business, in particular.
With the cooperation of Lloyds, both parties have agreed to an array of actions set to make Lloyds compliant, and further ensuring that customers are made aware of their options. These measures include writing to customers within September. Through these writings, Lloyds will notify customers that they do not need a BCA account with Lloyds in order to leverage the Bounce Back Loan Scheme’s loans. Furthermore, they will be allowed to switch to another provider at any point in time while still keeping the loan.
Alongside this, they will further be offered an option to switch their BCA account to a fee-free loan servicing account, as well.
Lloyds will further ensure that any customer that does indeed retain their BCA account, will be further reminded of these options two months before any charges will be introduced. Alongside this, Lloyds will report back to the CMA about its progress, as well.