A small firm in Walsall was left unable to pay employees after its bank froze its account – despite being £15,000 in the black.
Hare’s Moor, which makes DIY curry kits to sell to big name retailers like Ocado, Harrods and the Co-operative, could not access cash to fulfil orders and pay salaries after its account was blocked by Lloyds TSB.
The problem was triggered after Hare’s Moor was given a loan of £15,000 from the Black Country Reinvestment Society (BCRS), which lends to companies which can’t get finance from their banks.
Because of a dispute over whether BCRS sent a vital legal document – known as a “waiver on a debenture” – the bank froze the account. But BCRS claims it sent the documents on the day it received the request.
Hare’s Moor founder Sally Hare said she discovered via letter that Lloyds TSB had frozen the account, not having picked up a message left on her home phone the previous day.
“My employees have got mortgages to pay at the end of the month and we couldn’t fulfil an order for the Co-op and Ocado,” she said. “For a small business it’s enough in a recession trying to make ends meet. The last thing you need is for life to be made more difficult by big institutions that should know better.”
A spokeswoman for Lloyds TSB said she could not comment on individual cases, but added that the bank followed standard practice when a debenture is placed on an account.
She said: “If a customer has given a debenture to a third party, for a bank to then operate a business account for that customer, the bank needs to get a legal agreement from that third party in order to do so – in effect to be given a waiver by that third party.
“Once the third party agrees to the waiver, the bank is able to unfreeze the account in full knowledge that it won’t be liable for breaching the third party’s debenture on that account.”
On learning of Hare’s Moor’s difficulties, BCRS stepped in and made a temporary loan of £2,000 into another account to enable the firm to pay its staff.
Paul Kalinauckas, BCRS chief executive, said: “Despite us signing a waiver in favour of the bank it seems that it has failed to deliver the benefits of our loan to the company.”
