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NatWest ordered to refund SMEs for ‘bundling’

NatWest head office is in Gogarburn (pic: Terry Murden)

NatWest Group, trading as Royal Bank of Scotland north of the border, is refunding £600,000 to more than 700 smaller businesses after it broke competition rules by forcing them to open fee-paying accounts to take out loans.

The Competition and Markets Authority (CMA) described the behaviour as unacceptable while the bank said it was a “technical issue”.

NatWest was found to have forced small business customers applying for loans to open higher cost accounts instead of allowing them to have fee-free feeder accounts.

A number of banks have been criticised by the watchdog for the practice known as “bundling”, which is against industry rules.

HSBC is refunding about £800,000 to small business customers after it breached rules, while Lloyds Banking Group, Clydesdale – owned by Virgin Money – and Danske Bank have faced similar reprimands.

The NatWest breach occurred from November 2016 to March 2020 and it informed the regulator of the violation in January last year.

The bank will now reimburse the 702 customers for the fees they were charged during the period and has been ordered by the regulator to hire an independent auditor to review its compliance with the rules.

Adam Land, senior director of remedies at the CMA, 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. These rules are there for a reason: to make sure small businesses are treated fairly and to make sure the market is competitive.”

A spokeswoman for NatWest 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.”

The breach was caused by a problem with NatWest’s Electronic On-Boarding Account Opening 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 NatWest’s system meant it would only automatically open the latter.

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