Lloyds Banking Group has been censured by the competition watchdog for forcing small companies damaged by the pandemic to open paid-for business current accounts to access emergency state-backed loans.
The Competition and Markets Authority said the bank, one of the largest in the small business market, had unfairly limited choice by requiring companies seeking credit during the crisis to open an account so they could access the Bounce Back Loan Scheme.
The watchdog said 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 the scheme.
The scheme, which has underwritten £35.5 billion of credit, provides lenders with a 100 per cent state guarantee on low-interest loans to qualifying small companies. Lenders, rather than the state, have to provide the capital.
The regulator is concerned that the practice could have undermined competition in the small business banking market because customers may want to keep their account with one provider while borrowing elsewhere. It said Lloyds “put their customers at risk of being unnecessarily charged”.
The business accounts come with a monthly fee but the charges are not applied for the first year so new customers would not yet have lost money.
Lloyds said the requirement helped customers to access funding quickly.
Mike Cherry, national chairman of the Federation of Small Businesses, said: “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.”
A Lloyds spokesman said 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”.