Santander business account customers are complaining after it emerged that the bank is to charge around 230,000 small business customers £7.50 a month for their accounts.
This is despite the account holders being promised free banking “forever” when they opened their business accounts with the Abbey National and the Alliance and Leicester Bank before Santander took them over.
The bank has been sending out letters to small businesses affected warning that the accounts will now have a fee which is to be introduced later this year.
Santander says that the terms of business say they can make a variation to terms of the account - but some customers are complaining saying that this is not a variation but a compulsory transfer to new terms.
Santander says that the accounts are no longer viable but customers are concerned that they will now be charged for their account even if they run a very small business with few transactions.
Small business reaction
Tony Orchard who runs a small property business near Reading said: “I am a small company with few banking transactions and chose to get free banking for ever because I had no use for the complicated products offered to larger companies.
“I was not interested in getting any interest for the small amount I had in the business account. That was a bonus but it soon disappeared or was reduced to nearly zero.”
Some customers are concerned that once Santander get rid of free banking and impose a charge on business accounts, it could herald further transaction and processing charges in the future such as charging for cheques.
Santander says that customers will receive a better service in return for the charge. The bank says all customers will receive a further 0.25 per cent interest on their balances and that it will employ more business managers in branches.
A spokeswoman for Santander said: "Our business customers have told us they require more.
"The majority of our customers will see that this account is highly competitive and gives them the all-round service they demand so that they can concentrate on growing their businesses.
"It is not viable to offer them more, for free."
However, Mr Orchard says he will now have to pay £90 annually for no extra benefit.
“Now I am going to get no better service for an enforced cost of £7.50 per month – what better service is there other than looking after my incomings and outgoings?
"So I am left with trying to find another bank that won’t charge me for the basic service I require – and they all seem to think that a business account wants all this “extra” service and therefore it has to be paid for, even if it isn’t needed."
However, Santander says that the terms and conditions of the small business accounts make it clear that charges can be imposed by the bank as long as it gives customers 60 days notice.
Customers who refuse the fee will have to close their accounts and transfer to a business account with another bank. Business customers do not have the same rights as individuals over small print in contracts.
Many business customers believe the new plans are a clear contradiction of how their accounts were originally marketed to them.
What can customers do?
If you are a business account affected by the decision both the Financial Ombudsman Service (FOS) and the Financial Services Authority (FSA) have advised people to complain to Santander to begin with and to get an answer from Santander within the eight-week limit.
The Federation of Small Businesses (FSB) says it is investigating whether the bank may be in breach of contract.
Meanwhile Marc Gardner of the Consumer Action Group say that people in Mr Orchard’s position should consider going to court to obtain a judgement that the bank may be breaching obligations under the Banking Conduct of Business (BCOB) regulations.