Two leading UK banks have been put on the proverbial naughty step by the Competition and Markets Authority (CMA) following a “serious” breach of industry rules.
HSBC and the Northern Ireland-based First Trust Bank were found to be illegally bundling loans and accounts by telling SMEs that they could not take out a business loan without first opening a current account with the bank in question.
This practice was outlawed in 2002 in order to improve banking competition for smaller companies, but a compulsory compliance audit found that the rule was being flouted by staff. Two other banks were found to have very low awareness among their staff that these practices are off limits.
All major banks in the UK had been instructed to carry out the audit after concerns were brought to the attention of the Office of Fair Trading. Due to the outcome of the audit, these banks will need to repeat the process by July next year to demonstrate that the unlawful practices have been stamped out.
Alex Chisholm, chief executive of the CMA, said: “Although all eight banks have recognised the importance of complying with the undertakings and are taking steps to address this, when breaches occur we need to ensure that there will be full compliance.”
Both HSBC and First Trust have insisted that they are taking pains to address the issue.
“We have been working with the CMA to implement a plan ensuring full compliance with the requirements, and will be regularly reporting back to the CMA,” said HSBC. “As part of our audit review, where we find a customer has received the wrong information, we will take action to ensure they have the right information going forward.”
“We have written to all 11 customers identified in the CMA report to advise that they are under no obligation to operate or hold their business current account with us,” added First Trust in a statement. “We have also implemented a number of changes to our policies and procedures to ensure full compliance with these undertakings in the future.”