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UPDATE 1-Competition watchdog blocks Lloyds' unfair treatment of COVID-19-hit firms

(Adds Lloyds comment)

LONDON, Sept 8 (Reuters) - Britain’s competition watchdog has stopped Lloyds Banking Group from forcing small business customers hit by the COVID-19 pandemic to open business current accounts to access emergency state-backed funding.

The Competition and Markets Authority said Lloyds had unfairly limited choice by requiring struggling companies to open a business account in order to get a so-called ‘Bounce Back’ loan.

The CMA found 30,000 customers that were running their business using their personal account were required by Lloyds to open a business account to access the scheme.

The CMA said Lloyds had agreed to a number of actions and was informing affected customers of their options.

“By forcing businesses to open current accounts as a pre-condition to access this scheme, Lloyds breached the CMA undertakings it signed, reduced choice and put their customers at risk of being unnecessarily charged,” the CMA’s Adam Land said.

A Lloyds spokesman said the bank had asked customers to open a business account to ensure quick access to funding.

“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,” the spokesman added. (Reporting by Iain Withers, Editing by Lawrence White)