Ministers step in to urge Santander to stop charging small firms £120 a year

Furious ministers have intervened to tell the bank to stand by its vow to never charge for their services.

The bank has been writing to loyal business customers in recent weeks to tell them they face charges of £9.99 a month from October.

The bank removed these free accounts for new customers from 2011, but abandoned an attempt to charge current customers for them after suffering a backlash.

Customers claimed there had been a potential breach of the contract in which they signed up for the banks.

There are thought to be up to 50,000 small firms who could be affected by these changes.

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Former brochures and marketing materials for accounts from subsidiary banks Abbey National and Alliance & Leicester had boldly promised that the accounts would be "free forever" unless there were changes to the law or new banking or tax charges.

But these subsidiaries were rebranded and brought into Santander in 2010.

The accounts were shifted to a 'Business Everyday' account in 2015, which did not include the "free forever" promise.

However, small firms are fuming that Santander is now trying to charge them to bank and feel they have breached their contract.

Now ministers are stepping in as part of a bid to make them think again.

Vince Mcgarry, 62, is one of those small firms affected by this - and is helping lead the campaign against the move - gathering paperwork from 15 years ago to prove they advertised it.

He’s banked with them for more than 16 years.

Mr Mcgarry, who has his own framing business and art gallery, told LBC it was a difficult time to be a small business owner after the Chancellor’s Budget - and this was making things worse.

He said: “They advertised the account as ‘free forever’. They are breaking the promise they made when they opened the account.

"I don’t think they believe in loyalty... those small businesses who they rely on. Loyalty doesn’t mean anything these days.

“We’ve been hit by the minimum wage increase, National Insurance, an online tax system. The [government] taken away our rate relief, all these little things are adding on and on.

“And now Santander want to add another £120 on.

“I’ll be £3,500 worse off this year because of the Chancellor's Budget, and now Santander want to add ore grief to that."

In a letter seen by LBC, Gareth Thomas, the minister for small business has said he was "dismayed" at the reports - and begged them to reconsider or risk reputational damage.

He wrote: "I appreciate that times have changed, and this is not an offer you could make to new small business customers today.

"Nonetheless it was made at the time and has been honoured ever since.

"I would urge you to reflect on whether this is the right moment for Santander to seek to impose this change unilaterally on its customers, given the reputational impact."

Mr Thomas urged them to make attempts to restore trust so they "have the confidence to borrow and expand".

He added: “These are some of the bank’s most loyal customers, who chose their banking provider over a decade ago based on this pledge.

“As a pro-Business government, we will always be firmly on the side of small firms, and through our Small Business Plan we’re giving small business owners the backing they need for their business to thrive and drive growth across the country through our Plan for Change.”

Mr McGarry said: “I hope it works, but Santander say they’re in the right. They say, if you don’t like it, move your account.

“That’s not customer service. I think we’ve got a battle on our hands.

“If we lose, there’s other cheaper accounts out there."

Consumer champion and LBC host Dean Dunham said that he doesn’t think there’s a case for the bank breaking any laws.

But making a complaint to the Financial Ombudsman could cost hundreds of pounds for every case brought - and could force them to think again.

He explained: "It is important to note that the issue here concerns 'business' accounts meaning that the usual consumer laws and protections do not apply.

"Instead, the holders of the account need to rely on what the terms and conditions and contracts between themselves, and the bank says.

"On the face of it, the 'free forever' banking promise did form a term of the contracts here, meaning Santander would have to honour this, unless there was a change in the law of tax charges - as these exceptions seem to have been cited in the original documentation.

"However, whilst this obliges Santander to honour the free forever promise, it does not stop the bank closing these account types and unfortunately this is precisely what the bank has done here.

"It is therefore simply trying to move customers to a new account type, that now attracts a charge, and in law it will get away with this.

"So, there is no 'legal' challenge that could be raised in my opinion but there is a route the affected business owners could take to make Santander think twice about this move.

"Making a complaint to the Financial Ombudsman would cost Santander hundreds of pounds per case, landing the bank with a bill that could dwarf the banking charges for a period of time if enough customers complained."

A Santander spokesperson told LBC: “The business banking landscape has changed significantly over the last decade. As such, we are simplifying our business banking offering as the first step to ensure that we can sustainably and efficiently evolve to better meet the needs of our business customers in the future.”

The bank also said that anyone who didn’t want to move to the new account are able to close it or switch to another provider with no additional fees.

And they also highlighted that 60,000 business banking customers had been assisted with their educational content, business strategy coaching, and courses to help their firms to grow.