01
April 2022
HSBC Wrongly Required SMEs to Open Business Accounts to Get Loans
The Competitions and Markets Authority (CMA) has chided HSBC after the bank told some Scottish small businesses that they needed to open or maintain business current accounts to qualify for a loan - a violation of banking regulations.
Under competition laws in the UK, customers shouldn’t have to hold business accounts with a bank to access loans from that lender. The practice, known as bundling, can reduce a business's access to credit and discourage them from switching to another bank, the CMA says. It acted to limit the bundling of bank accounts and loans in 2002.
However, between 2002 and 2021, HSBC misled 204 SMEs, mostly based in Scotland, by requiring them to open or maintain business current accounts to access business loans. The policy, which HSBC blamed on an error, affected 210 loans worth more than £800,000.
HSBC identified the issue itself and notified the CMA between 2020 and 2021. The CMA conducted an investigation and has now imposed legally-binding directions on HSBC, requiring it to meet standards for staff training and produce an independent assurance report.
HSBC already wrote to all impacted customers in September 2021 to waive the clause in their loan agreements that stipulated they had to open and maintain a current account. It also issued refunds of their business current account charges.
Adam Land, CMA senior director, said: “The rules are clear - banks should not ask customers to open or retain business accounts in order to have a loan with them.
“It is right that HSBC have offered refunds and we will monitor compliance with our directions closely to ensure this doesn’t happen again.”
A spokesperson for HSBC UK said: “We are sorry that an error in our legal documentation for 200 predominantly Scotland-based customers, resulted in us potentially hindering them from switching banks.
“We have apologised to the customers concerned and have proactively refunded all fees and charges that they incurred during the period that those terms and conditions were applicable. We have been working closely with the CMA and have made changes to our processes and procedures to ensure that we are fully compliant with the undertakings.”
