Lloyds Bank has been given a slap on the wrist for making small businesses – primarily sole traders – seeking emergency cash during the COVID-19 crisis, open a fee-paying business account in order to access the Bounce Back loans. Following the high-street bank’s decision to ban contractors in response to IR35 reform, this latest development has seen the group criticised by experts for its overall treatment of independent professionals.
The Competition and Marketing Authority (CMA) said that by making it a requirement for freelancers to open such an account when applying for a loan – also known as ‘bundling’ – Lloyds Bank had unfairly restricted competition and limited choice for small businesses.
According to the CMA, around 30,000 customers, who were running their business through a personal account, were told by the banking group which includes its Bank of Scotland arm, they had to open a business account.
Adam Land, senior director of remedies business and financial analysis at CMA, said: “By forcing businesses to open current accounts as a pre-condition to access this scheme [Bounce Back loans], Lloyds breached the CMA undertakings it signed, reduced choice and put their customers at risk of being unnecessarily charged.
“Following our action, Lloyds is taking the steps necessary to become compliant and will shortly be contacting existing customers to inform them of their rights.”
Although customers will not have to pay any charges associated with the account for the first 12 months, it still breached CMA’s guidelines.
The CMA stated that some businesses may keep the account longer than the free-period, “resulting in charges for an account that may not” suit them.
A spokesperson from Lloyds Banking Group told Contractor Weekly that the requirement helped businesses access the funds quickly. They added: “Any other solution would have created unnecessary delays at a critical time for businesses. […] We proactively informed the CMA of our approach and are now writing to our customers to reiterate that they can transfer their account to a free loan servicing account at any time, should they wish to do so.”
This is not the first time it has seemed like Lloyds has targeted the self-employed. Last year, the high-street lender introduced a blanket ban on engaging with contractors because of the upcoming reforms to the off-payroll rules (IR35).
IR35 changes, which have now been delayed to April 2021, will see medium and large businesses become responsible for determining a contractor’s IR35 status. If they get it wrong, they will be liable and could face a fine by HMRC. As a result, Lloyds said all contractors working via their own limited company had to either work via an umbrella company or become an employee.
Despite the delay to IR35 reform, the blanket ban still applies. According to one source, many contractors turned to work via an umbrella company on March 1 with the first payroll only being run in April.
Now, those contractors who opted to become an employee may be dealt another blow as Lloyds announced 865 job cuts.
The job cuts will not affect any branches. The bulk of the roles going will be in Lloyds’ insurance and wealth divisions, which are no longer needed after its partnership with Schroders.
The banking group confirmed that no-one will leave the firm until November at the earliest and they will “seek to redeploy wherever possible”. The spokesperson said the job cuts will be offset by the creation of 226 new roles.
Seb Maley, CEO at Qdos, said: “Freelancers, contractors and small businesses are being hit time and time again. Lloyds should be supporting these workers, not penalising them and, when it comes to IR35 reform, refusing to engage them.
“Independent workers offer firms unrivalled flexibility and access to key skills at a cost-effective rate. In these uncertain times, contractors are key to helping businesses bounce back – something that Lloyds would be wise to bear in mind.”