Coronavirus loan rule breach by Clydesdale blocked by regulator | Business News

A watchdog has stepped in to stop Clydesdale Bank forcing small firms to open a business account with it to access coronavirus loan support – in breach of the rules.

The move comes after the Competition and Markets Authority (CMA) found the lender had broken legal undertakings, which ban the practice known as bundling.

This is where customers are forced to open a business current account with their loan provider.

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The regulator points out this restricts competition and limits choice and could see small firms stuck paying for a business current account that does not meet their needs.

The CMA’s action comes after it found that Clydesdale was requiring small companies to open a business account with it to get a COVID-19 Bounce Back Loan.

The scheme is intended to help businesses access finance quickly during the coronavirus pandemic.

While the customers would not initially be charged for these business current accounts, the CMA pointed out they may have kept them open for longer than the initial fee-free period rather than opening a more suitable facility with another provider.

In December, Clydesdale wrote to those customers affected to inform them that they are not required to keep the business current account for the duration of the Bounce Back Loan, and offered them the option of switching to a fee-free loan servicing account.

The CMA has recorded the breach and also formally written to the bank.

As the loan scheme provides critical support to small businesses, even minor breaches are regarded by the CMA as significant.

Adam Land of the CMA said: “The Bounce Back Loans Scheme provides critical support to small businesses during the pandemic.

“We are acting to ensure that the large banks do not restrict the choices of small businesses by bundling loans and business current accounts.

“We are pleased that Clydesdale is now taking the steps necessary to become compliant.”

Clydesdale is one of the UK’s eight main banks which are currently subject to the bundling prohibition.

Sky News