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Barclays censured by UK watchdog over treatment of small businesses

Barclays censured by UK watchdog over treatment of small businesses

Barclays must reimburse smaller businesses compensation that amounts to a drop in the ocean compared with the bank’s own income after it broke rules that were designed to protect the companies, the UK’s competition watchdog said on Thursday.

The UK bank must dole out a total of £2,000 to affected business premium account and deposit account holders to make up for payments the smaller companies should not have been obliged to make, the regulator said. The financial services group reported pre-tax profit of £1.5bn in the first quarter.

The Competition and Markets Authority is prevented from imposing fines for breaches of either orders or undertakings. However, in a letter to Greg Clark, secretary of state for business, energy and industrial strategy, CMA chair Andrew Tyrie in February requested these powers to ensure proper deterrence as part of a package of wider reforms to the watchdog’s powers.

Barclays, which had signed up to the rules over small businesses in 2002, must improve its practices, the CMA said. The rules prevent banks from insisting that businesses open or maintain current accounts before they are able to access their other products, the regulator said.

“The bank’s actions led to unnecessary costs to some SMEs who were made to hold accounts they did not need,” the CMA said.

The CMA directed the bank to take immediate action and ensure the problems do not occur again. The regulator also demanded it appoint an independent body to audit its compliance and deliver the independent body’s report.

Barclays admitted to the CMA that it had failed to comply with “aspects of legal undertakings” that were set up to make it easier for businesses to shop around and choose the best accounts for them, the watchdog said.

“We’ve been working closely with the CMA and have corrected a mistake we made which affected a small number of business customers,” a Barclays spokesperson said. “We’ve taken steps to ensure that this does not happen again.”

About 800 clients have been affected and will be reimbursed, the bank said.

Since first reporting the issue to the regulator, Barclays has moved to fix the problem, including allowing affected customers to transfer funds to and from other banks, and by changing their terms and conditions so that businesses who want to open certain deposit accounts are no longer told they have to hold a Barclays current account, the watchdog said.

Barclays breached the rules by preventing small and medium-sized businesses that had premium accounts from transferring funds to or from accounts outside Barclays and also by telling holders of notice deposit accounts that they had to open a current account at Barclays.