Recently, Lloyds Banking Group (LYG - Free Report) informed Britain’s Competition and Markets Authority (“CMA”) about its non-compliance anti-competitive practices since May 8. The lender wrongly asked nearly 30,000 people to open a business current account upon applying for the government’s Bounce Back Loan Scheme.
The scheme was designed to protect small businesses amid the coronavirus-induced slowdown. The regulator has stopped Lloyds from continuing this wrongdoing.
The clients were operating through their personal accounts but were asked to open a fee-paying business as well in order access loans under scheme. The fee would not have been charged initially but in the later periods.
Adam Land, CMA senior director of remedies business and financial analysis, said “By forcing businesses to open current accounts as a pre-condition to access this Scheme, Lloyds breached the CMA undertakings it signed, reduced choice and put their customers at risk of being unnecessarily charged.”
Remedial Measures Undertaken
On consulting with CMA, Lloyds has agreed to inform all affected customers in writing. Also, the clients will be offered option to switch to a fee-free loan servicing account or to another provider at any time while keeping the loan.
Further, in case clients agree to retain their business accounts, Lloyds is supposed to inform them about any upcoming charges at least two months before. Also, it is required to give timely updates on its progress to CMA.
Going forward, customers making new applications for loans under the scheme will have an upfront choice to either open a business current account or a fee-free loan servicing account.
Shares of Lloyds have lost 35.9% over the past six months compared with the industry’s decline of 5.3%.
Currently, Lloyds carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past few years, several global banks, including Credit Suisse (CS - Free Report) , Bank of Nova Scotia (BNS - Free Report) and Toronto-Dominion (TD - Free Report) have been accused of money laundering, spoofing and swap dealing, among others. The banks have charged penalties or are still facing probes and lawsuits.
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