The bundling required small business customers to open a business current account (BCA) with the bank while applying for a loan
UK’s Competition and Markets Authority (CMA) has prevented Lloyds Banking Group (Lloyds) from forcing small business owners to open business current accounts (BCA) to avail the government’s Bounce Back Loans.
The bundling requires small business customers to open a business current account (BCA) with the bank while applying for a loan.
The regulator said that bundling would restrain competition and limit the choice of customers who may prefer having an account with one provider while using different bank for their loan.
CMA remedies business and financial analysis senior director Adam Land 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.”
Around 30,000 customers opened BCA with Lloyds to avail the Bounce Back Loan
The UK regulator’s action follows the bank notifying about its non-compliance with certain legal undertakings designed to protect customers from the anti-competitive practices.
The CMA has found that Lloyds is not in compliance with the undertakings since 8 May 2020.
Approximately 30,000 customers running their business finances through a personal current account (PCA) were forced to open a BCA with Lloyds, to avail loan through the Bounce Back Loan Scheme.
UK government’s Bounce Back Loan Scheme is aimed at providing small businesses with access to rapid finances during the coronavirus (Covid-19) pandemic.
The bank has agreed to work with the CMA in taking several measures to become compliant and ensuring the affected customers aware of the options, including informing customers that opening a BCA with Lloyds is not required for the loan purposes under the Bounce Back Loan Scheme.
Land 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.”