NatWest has found itself in hot water after forcing hundreds of business customers to open fee-paying current accounts in order to secure a loan.
The high street bank is now having to refund around £600,000 to small and medium-sized business after legal direction from the Competition and Markets Authority (CMA).
The CMA found that NatWest breached banking rules by telling business customers they had to open a business current account, which incurs fees, in order to be given a loan – a practice known as ‘bundling’.
The result has been hundreds of businesses being charged monthly fees for accounts that they may not have wanted nor needed. It also meant businesses’ were unable to hold an account with a separate provider, which may have better met their requirements.
‘Direct breach of rules’
The breach lasted for more than three years, with NatWest failing to alert the CMA until January 2021. Having scrutinised the error more closely, the CMA became aware the bank had signed certain customers up to a business account, when they had specifically requested to have a fee-free account.
Adam Land, CMA Senior Director of Remedies, said: “Forcing businesses to open costly current accounts to secure essential loans is unacceptable – and a direct breach of our rules, which have been in place for 20 years. NatWest should have known better. These rules are there for a reason: to make sure small businesses are treated fairly, and to make sure the market is competitive.
“The CMA has now issued legal directions to NatWest, and the bank is in the process of refunding affected customers. NatWest will write to all affected SME customers with a business account to offer them the option of switching to a fee-free loan servicing account.
The move comes as part of the CMA’s crackdown on breaches of its banking rules. Over the past four years, it has put a stop to bundling by HSBC, Danske Bank, Clydesdale Bank, and Lloyds, as well as securing millions in refunds in relation to overdraft charges: £17 million for Santander customers; £11 million for Metro Bank customers; £8 million for HSBC customers; and £7 million for Nationwide customers.
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Source: New feed