The Competition and Markets Authority (CMA) has found that NatWest breached 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’.
As such, hundreds of businesses were charged monthly for a business account that they may not have wanted or needed. 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 took place between 2017 and 2020, with NatWest failing to alert the CMA until January 2021.
Having scrutinised the error, the regulator 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.
A total of 956 NatWest customers were affected, with 702 set to receive refunds.
NatWest will now write to all affected small businesses to offer them the option of switching to a fee-free loan servicing account.
A statement from NatWest read: "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."
The breach was caused by a problem with NatWest’s on-boarding system and affected customers who were new to the bank and were applying for a small business loan.
While businesses were offered the choice of opening either a fee-free feeder account or a business current account, which had charges attached, a fault with the system meant it would only automatically open the latter.
The CMA action comes as part of its crackdown on breaches of 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: £17m for Santander customers, £11m for Metro Bank customers, £8m for HSBC customers and £7m for Nationwide customers.
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