RGL Management, which is representing the claimants, believes there could be as many as 1,000 or more small businesses which would join the action. However, it has been criticised for taking a significant percentage of any compensation.
The so-called Tailored Business Loans offered by Clydesdale Bank were taken out between 2002 and 2012, and allegedly came with hidden break clauses which imposed large penalties on the firms if they tried to pay back the loans early.
In response to the news, Clydesdale Bank issued the following statement: “We have seen media reports of a potential claim being considered in relation to Tailored Business Loans, however we have not received any such claim to date from RGL Management Ltd. It is therefore not possible to comment on speculation around any potential case or the the basis for any claim.”
“In relation to Tailored Business Loans, this is a long-standing historical matter, which has been subject to significant scrutiny and which the bank has been working through with customers as part of a wide-ranging remediation programme, in an open and transparent manner. We have made significant progress in resolving the vast majority of cases. Where we have reached a final agreement with customers, the cost of this has been covered by existing provisions as extensively disclosed in our financial reports,” it added.
£1.6bn in damages
James Hayward, CEO of RGL told Mortgage Solutions that pre-action correspondence with Clydesdale will take place in the next 3-4 months. Prior to that he is undertaking a marketing campaign involving press advertising to try and build the number of claimants from the hundreds to around 1,000. “If we have 1,000 claimants we’ll be asking for over £1.6bn in damages, which is when it starts to get interesting.”
Hayward explained that in return for RGL assuming all the financial risk of litigation it never takes more than 50% of the compensation awarded to claimants.
He added: “These people don’t have anywhere else to go, as but for us they would have no redress. Clydesdale has told claimants: ‘come to us and we’ll compensate you’ but that is unrealistic. It is a bit like a rapist saying to the victim, ‘it was consensual’.”
RGL is running a similar claim on behalf of small businesses against the Royal Bank of Scotland’s now defunct Global Restructuring Group. It alleges that GRG helped bankrupt these businesses to boost profits.
Separately, Clydesdale Bank Intermediaries has announced the launch of its lowest ever fixed rate mortgage. It is offering a two-year fixed rate of 1.24%, as well as a five-year fixed rate of 1.89%.
The bank is expanding its range of 60% loan-to-value (LTV) products and reducing rates on a number of other products by up to 0.2%. The new rates are:
- two-year fixed at 1.24% and an arrangement fee of £999 (loans £80,000-£499,999) or £1,499 (loans £500,000 – £1m);
- five-year fixed at 1.89% and an arrangement fee of £999 (loans £80,000-£499,999) or £1,499 (loans £500,000 – £1m);
- five-year fixed at 2.04% and no arrangement fee (loans £80,000-£1m).
The new products are available for purchase and remortgage applications.