The fall-out from UK Government coronavirus support schemes: ensuring the good-faith customer does not lose out

The coronavirus has placed an unprecedented strain on people and businesses across the UK and the world. A major concern of the UK Government, perhaps only behind public health, has been the state of the economy, of which UK businesses are an integral part. The UK Government has therefore sought to support businesses through the pandemic with a wide range of financial support schemes, including loans and grants.

In order to effectively ensure that the money given through these schemes reaches eligible businesses in time to have the desired effect, the UK Government has been reliant on the banks in the UK with whom businesses hold banking accounts. There has, therefore, been room between the UK Government and those banks for the different priorities of good government to clash with each other.

The Government wants eligible businesses to receive financial support quickly and efficiently via their bank accounts. At the same time, the Government will be anxious to ensure that as much of the billions of pounds it commits through these schemes reaches eligible (rather than ineligible) businesses, and compliance with the terms of the loan or grant are monitored and met.

It is not difficult to predict that the first people to suffer as a result of any difficulties between the Government and large banks to iron out the creases in all of the different schemes will be the businesses themselves, as well as the people who own and run them.

In our increasingly online world, those people and businesses have put their experiences online and common issues have quickly begun to emerge. With this, online support groups have emerged and articles written. A ‘This Is Money’ article ran one such article under the headline “’NatWest shut our accounts out of the blue – and refuses to tell us why‘: The bank customers who insist they’re victims of a Kafkaesque injustice”. 1

It appears that banks such as NatWest are relying on the terms and conditions of their customers’ bank accounts, which make provision for suspicions of fraud or other such criminal activity, to freeze and / or close the accounts seemingly inexplicably. Given the extent to which this has impacted on apparently innocent customers, it further appears that UK banks are relying on these contractual terms to cope with the issues created by the huge volume of loans, grants and money passing through their bank accounts.

Online support groups are naturally a place to share ideas for resolving each other’s problems, including via legal means. The pre-coronavirus judgment in the High Court case of Lonsdale v National Westminster Bank Plc ([2018] EWHC 1843 (QB)) is a case that is being shared as offering people a legal basis for pushing back at the banks.

Lonsdale v National Westminster Bank Plc [2018] EWHC 1843 (QB)

Lonsdale v NatWest was a claim brought by Mr Lonsdale, a customer of NatWest, in 2017 for breach of contract (the ones on which his bank accounts were created), breach of his data rights and defamation. Mr Lonsdale had several business and personal accounts with NatWest that were frozen and then closed following reports by the bank to the National Crime Agency of its suspicion the accounts were being used for illegal activities. NatWest sought to deny Mr Lonsdale access to the content of those reports whilst at the same time seeking to have his various claims struck out. Ultimately the Judge found that the bank could not hide behind vague statements of ‘suspicion’, the claims should be resolved at trial and that this would not compromise law enforcement work. The judgment is a warning to all banks who seek to rely on legal privilege and their legal duties (to prevent crime) to avoid answering to the claims of their customers who deny any involvement in criminal activity. Certainly, the judgment would offer hope to a customer who has had their bank account inexplicably frozen and / or closed for reasons of illegality.

It seems clear from the above judgment that, given the correct application by the courts of the principles of public policy, that customers can (and should) expect to be protected from banks who seek to rely on their legal duties to prevent crime as if those duties were unqualified. The courts should assist innocent customers seeking to enjoy their contractual rights to a functioning bank account and, where this is denied them, an explanation as to why not and an opportunity to show that the bank is wrong. As such, the customer-bank relationship is one for which UK businesses and people generally do have recourse to the courts and should not be left to feel that they are operating in an unfair “Kafkaesque” world.

Although there is considerable pressure on the banks to safely and effectively facilitate a huge volume of money and public financial help, those banks should direct their resources to ensure that that is done properly. The primary aim of all concerned has to be and should be to assist the bank’s customers and UK businesses.