NatWest is set to refund hundreds of business customers after it wrongfully forced them to open current accounts to secure a loan, which cost them money. The Competition and Markets Authority (CMA) said the bank "should have known better" after an investigation found that NatWest breached CMA banking rules by forcing business customers to open a business current account, which incurs fees, in order to secure a loan – a practice known as ‘bundling’.
It means hundreds of businesses have been charged monthly for a business account that they may not have wanted or even needed between 2017 and 2020. It also limited businesses’ choice as they were unable to hold an account with a separate provider, which may have better met their requirements.
The breach lasted for more than years, with NatWest failing to tell the CMA until January 2021. Having investigated 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.
A total of 956 NatWest customers were affected, with 702 set to receive refunds to the tune of £600,000.
The CMA has now issued legal directions to NatWest, and the bank is in the process of refunding affected customers. NatWest is now set to write to all affected SME customers with a business account to offer them the option of switching to a fee-free loan servicing 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 move comes as part of a major crackdown on breaches of banking rules and in the past four years, with banks like HSBC, Clydesdale Bank, Lloyds and Danske Bank forced to stop bundling.
A NatWest spokesperson said: “A technical issue meant that a small number of new business customers were incorrectly provided with a business current account when taking out a business loan. On discovery of this issue, we promptly informed the CMA of the error and resolved it. We have written to the small number of business customers that were affected and refunded them in full.”
