NatWest to refund £600k to SMEs
The Competition and Markets Authority (CMA) has issued NatWest to refund over £600,000 to hundreds of business customers after it broke banking rules
Over 700 small and medium-sized businesses are to receive refunds after being forced to open current accounts, which incurred fees, in order to secure a loan – a practice known as ‘bundling’.
The legal undertakings, which were signed by NatWest in 2002, placed a ban on banks insisting SME customers in opening a business current account in order to get a business loan.
NatWest breached the undertakings, charging hundreds of businesses monthly for a business account they might not have wanted or needed. It also limited businesses’ choices as they were unable to hold an account with a separate provider.
Around 956 NatWest customers were affected, with 702 set to receive refunds.
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 breach had lasted for over three years, between November 2016 and May 2020. The bank failed to alert the CMA until January 2021.
Upon inspection, the CMA became aware that NatWest had signed customers up to a business account, when they had specifically requested to have a fee-free account.
The CMA has now issued legal directions to NatWest, and the bank is now refunding affected customers. It will now 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 halted bundling by HSBC, Danske Bank, Clydesdale Bank, Lloyds and Barclays. During that time, the CMA has written publicly to banks 22 times and issued four sets of legally binding directions.
The CMA has also secured millions in refunds in relation to overdraft charges: £17m for Santander customers, £11m for Metro Bank customers, £8m for HSBC customers, and £7m for Nationwide customers. To date, customers have received more than £47m in refunds.
For more information, see the directions issued to NatWest by the CMA.
Story by Max Austin from Accountancy Daily