Originally written by Timothy Adler on Small Business

Lloyds has been named and shamed with for forcing small businesses to open paid-for business current accounts to access Bounce Back Loans.

The competition watchdog said that Lloyds, one of the largest in the small business market, treated small companies unfairly by requiring them to open an account to draw down state-backed Bounce Back Loans.

The Competition and Markets Authority that 30,000 customers who had been running their businesses using personal accounts were told by Lloyds and its Bank of Scotland arm that they must open a business account to access Bounce Back Loans.

>See also: Banks ‘will be pushed’ into closing down SMEs unable to repay Covid debt

The scheme, which has underwritten £35.5bn of credit, provides lenders with a 100-per-cent state guarantee on low-interest loans to qualifying small companies. High street banks, rather than the government, have to provide the working capital.

Back in 2002, Lloyds agreed not to ask personal account customers to open a separate account if they wanted to borrow money from the bank – a practice known as “bundling”.

But when it came to Bounce Back Loans, Lloyds asked existing customers operating their firms out of personal accounts to open fee-charging business accounts too.

>See also: HSBC handling of bounce-back loans branded ‘shambles’ by businesses

Although the new business accounts were free for the first year, charges would have kicked in after then.

The watchdog said Lloyds had restricted customer choice and had “put their customers at risk of being unnecessarily charged”.

Mike Cherry, national chairman of the Federation of Small Businesses, told The Times: “No bank should force small business customers to open fee-paying accounts to access government-underwritten emergency help. Those who were faced with that scenario should not face any kind of charge further down the line.”

Lloyds told the newspaper that it had informed the watchdog of its approach and was writing to customers to “reiterate that they can transfer their account to a free loan servicing accountant”.

Further reading

Microbusiness £50,000 Bounce Back Loans – how they work

Lloyds rapped for forcing Bounce Back Loans borrowers to open accounts

Source link