Santander has scrapped plans to force 230,000 small business customers to pay a fee for a current account marketed as being "free forever" following a backlash.

The banking giant first announced in July it would start charging business customers with free business bank accounts, but has now done a U-turn.

Customers were due to be hit with monthly charges of between £7.50 and £40 per month, depending on monthly credits, from later this year.

Affected customers who do nothing won't now pay a fee, but they can choose to switch to the chargeable account if they want.

Santander is writing to 80,000 customers it had written to about the plans to update them on its change of heart. A further 150,000 had not been told about the charges, and so will not hear from the bank.

'Free forever'

Abbey, which Santander bought in 2004, marketed its small business account as offering "free banking forever", while Alliance & Leicester (A&L), which Santander bought in 2008, marketed its account as being "free forever".

Santander marketed its business banking account as "free forever" until it dropped the phrase at the end of 2010.

Many MoneySavingExpert.com users contacted us up in arms about the changes. Forum user Paulgonnabedebtfree said: "If it wasn't meant to be 'free forever', it should have just been called 'free'."

A Santander spokeswoman says: "After listening to feedback from our existing customers, a small number of whom do not feel their businesses would benefit from these changes, we will be retaining the fee-free option for existing customers.

"We will, of course, be happy to upgrade any customer who would like to make the most of the additional benefits offered by the fixed-fee account."

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