Danske Bank reprimanded by UK competition watchdog

Danske Bank has been reprimanded by the UK competition watchdog for the treatment of some small businesses applying for Covid Bounce Back loans.

Danske required 305 businesses, trading through personal accounts, to open business accounts to access a loan.

The Competition and Markets Authority (CMA) said this meant the businesses faced new fees.

Danske has refunded the fees and offered to switch customers to fee-free loan servicing accounts.

It has also paid compensation, equivalent to 8%, of any fees and charges customers faced.

The CMA said the fees were “likely to have inflicted financial harm”.

Its investigation focused on what is known as “bundling” – when a bank requires a customer to open a specified type of account in order to get a loan.

The CMA says this restricts customer choice and, therefore, competition in the market.

In 2002, Danske, along with other banks, gave an undertaking not to engage in bundling.

After the Bounce Back scheme was launched in May 2020, Danske required 268 small and medium firms, which were operating their business finances through a personal current account, to open a business current account before it would consider a re-submitted Bounce Back Loan application.

A further 37 customers who opened a business current account did not re-apply for a Bounce Back loan.

The bank said it did this as the best way to promptly meet the demand for support from these firms, while also meeting its anti-money laundering obligations and the fraud checking requirements of the scheme.

However, the CMA did not accept this and concluded: “Danske Bank’s actions have resulted in 305 SMEs opening business current accounts with it which they may not have wanted or needed in order to obtain finance during a critical time.

“Additionally, Danske Bank has been applying charges and fees to the business current accounts held by these impacted small businesses; this breach is likely to have inflicted financial harm on these customers.”

The CMA is not planning any formal enforcement action against the bank, as it has already remedied the breach and paid compensation.

A Danske Bank spokesperson said that when it launched the Bounce Back Loan Scheme it “asked customers using personal current accounts for their business needs to open a business current account”.

It said its “driving purpose for doing this at the beginning of the scheme was to ensure that we balanced the risks of non-standard applications from personal current account holders, against the need to give customers quick access to the funds and avoid unnecessary delays at what was a critical time for them”.

“With hindsight, we now accept that the correct course of action would have been to offer customers alternatives, including a fee-free business servicing account option,” the Danske Bank spokesperson added.

“We have worked closely with the CMA to agree on an action plan that includes us contacting all customers who were not given this choice during the initial period of the loan scheme.

“We have already refunded all fees associated with the uptake of our core business current account in the intervening period.”


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