The Competition and Markets Authority (CMA) found NatWest breached banking rules through the practice known as ‘bundling’. It forced business customers to open a business current account, causing them to incur fees, in order to secure a loan.

As such, hundreds of businesses have been charged monthly for a business account that they may not have wanted or needed. It also limited businesses’ choice as they were unable to hold an account with a separate provider, which may have better met their requirements.

The breach lasted for over 3 years, with NatWest failing to alert the CMA until January 2021. Having scrutinised the error more closely, the CMA became aware the bank had signed certain customers up to a business account, when they had specifically requested to have a fee-free account.

Adam Land, CMA senior director of Remedies, said: “Forcing businesses to open costly current accounts to secure essential loans is unacceptable – and a direct breach of our rules, which have been in place for 20 years.

“NatWest should have known better. These rules are there for a reason: to make sure small businesses are treated fairly, and to make sure the market is competitive.”

The CMA has now issued legal directions to NatWest, and the bank is in the process of refunding affected customers. NatWest will now write to all affected SME customers with a business account to offer them the option of switching to a fee-free loan servicing account.

The move comes as part of the CMA’s crackdown on breaches of its banking rules. Over the past 4 years, it has put a stop to bundling by HSBC, Danske Bank, Clydesdale Bank, and Lloyds, as well as securing millions in refunds in relation to overdraft charges: £17 million for Santander customers, £11 million for Metro Bank customers, £8 million for HSBC customers, and £7 million for Nationwide customers.

A NatWest spokesperson said: “A technical issue meant that a small number of new business customers were incorrectly provided with a business current account when taking out a business loan.

“On discovery of this issue, we promptly informed the CMA of the error and resolved it. We have written to the small number of business customers that were affected and refunded them in full.”