Santander promised me free banking for life – can it really now get away with charging me £120 a year?

When Diana Grogan, 62, opened her business bank account with Abbey National in 2006, she was promised free banking for life.

The alternative therapist, who lives in Blackburn, Lancashire, had been advised by her accountant to open an account when she switched from being a sole trader to a limited company.

At the time, she says it was the best deal available because other banks were charging for deposits and withdrawals above a certain level. 

Ms Grogan was so taken with the offer that she even recommended the account to her then-boyfriend.

Fast forward 19 years and Ms Grogan still runs her business, but now faces having to pay for the bank account she has had since she was in her early 40s.

Santander, which bought Abbey National in 2004, told customers earlier this month they’d have to pay £9.99 a month for business accounts, including those who’d been promised free banking.

Diana Grogan was promised free business banking ‘forever’ when she opened her Abbey account in 2006

‘I was promised free banking for life’

Ms Grogan recalls opening her business account in 2006, and while she needed to meet certain conditions, she was assured she would never have to pay a penny.

By that point, Abbey National was under the ownership of Santander but was not brought under the same name until 2010.

Ms Grogan had no complaints with the service and has a personal current account with Santander. 

That may change now she is being asked to pay £9.99 a month for her business account.

Previously, in her free business account Ms Grogan could deposit up to £3,000 in cash each month, with a £1 charge per £100 over the limit. 

Cheque deposits were also free, and she was not charged for up to 100 cash withdrawals a month.

Not only does Ms Grogan now face being charged a monthly fee for her ‘free for life’ account, but it will also come with lower limits. 

Now, even Santander business customers who pay the monthly fee can only pay in up to £1,000 cash each month, with a £1.25 charge per £100 over the limit.

Meanwhile, cash withdrawal remains free from Santander cash machines, but customers will be charged £1.25 per £100 withdrawn at Santander or Post Office counters. It will also cost 70p to deposit a cheque.

Ms Grogan is furious that the bank has reneged on its promise to offer free banking for life, but Santander says business conditions have changed since the launch of the accounts.

A Santander spokesman said: ‘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.’

Broken promise: Santander business customers will have to pay £9.99 a month for an account

The landscape has changed for Ms Grogan and other small business owners too, though.

Ms Grogan launched her alternative therapy business when she was in her mid-20s but she says it has started to take a toll on her joints and she is ‘coming to the end of business life’.

Since the pandemic, she has shut her practice in Preston and works only a few days a week, earning £11,900 a year.

‘I’m a small business owner. My turnover is £37,000. To start taking £10 a month out of a small business that’s not really turning over a vast quantity of money… it’s losing £120 a year.

‘I also wouldn’t get any benefit from paying the fee. It’s not like there are things like car insurance or cashback, all I’d get is what I get now… a monthly bank statement.’

‘I’ll move my business elsewhere’

It is not the first time Santander has tried to charge its customers for business accounts.

In 2012, Santander told customers they would have to pay either £7.50 or £12.50 a month for a business bank account that was previously free.

Just two months later, the bank u-turned on the decision after feedback from customers and concerns complaints would be escalated to the Financial Ombudsman.

While some customers are likely to complain about this month’s decision, others may simply switch accounts to banks that offer free accounts, such as Monzo and Starling.

Ms Grogan is unlikely to keep her business with Santander. 

She says it is as much about the principle of charging for what was advertised as a free account and that nothing is stopping the bank from charging more in the future.

Last weekend, she went to the Santander branch where she opened her account years ago, to ask about the changes. She was told there was nothing she could do about it.

While she has been in touch to Santander to question the charges, she says if she doesn’t hear back soon, she will move all of her Santander accounts to a new bank.

Does a ‘free for life’ promise have to be kept? 

How can Santander start charging for accounts that were supposed to be free?

Legacy accounts acquired during the Abbey and Alliance and Leicester merger were migrated into the Business Everyday Current Account in 2015.

This off-sale account had no associated marketing material at the time, and Santander says that the Key Facts Document and terms and conditions did not state the account would be ‘free for ever’.

Santander says it sent letters to all affected customers explaining that some fees and charges would change. It also said it encouraged customers to read the Key Facts Document which contained further detail on specific conditions.

But the account remained free and some customers may well have thought that the same ‘free banking for life’ conditions remained. 

Ms Grogan says: ‘After the migration, I had 10 years of free banking… then they do this in a cost-of-living crisis’. 

Daily Mail’s legal expert Dean Dunham says: 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 or new tax charges imposed – 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.’