Banks Face Scrutiny Over Charges To Small Businesses

Banks are to come under scrutiny over services to small and medium-sized enterprises (SMEs) amid fears that institutions are failing to meet undertakings given to a regulator.

The Office of Fair Trading (OFT) said yesterday that it is to review the promises made by the banks in response to a 2002 Competition Commission report. The Commission said then that Britain’s big four banks had made excessive profits of more than £700 million from SME customers between 1998 and 2002.

It demanded that Barclays, Lloyds TSB, HSBC and Royal Bank of Scotland pay interest on SME current accounts in credit or offer free banking, or do both. It also recommended that banks should make it easier for customers to switch their business bank account.

Moneyfacts, the financial information provider, recently found that customers of one high street bank could be paying up £80 more each year in charges than they did three years ago.

Stephen Briault, of the Federation of Small Businesses, said: “Hopefully the OFT review will back up what the Competition Commission said in 2002. There has been some slow progress since then, which we welcome, and we are not expecting the issues to be resolved overnight.”

There are fears that the OFT review could lead the Competition Commission to relax the rules, which could leave small businesses out of pocket if banks cease to pay interest on current accounts.

The OFT will hold a nine-month consultation period, and will report to the Competition Commission at the end of the year.