RBS Confess to the Mis-Selling of Taxpayer-backed Loans to Small Businesses

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Posted in:Banking and Finance|January 20, 2015 | Join the mailing list

It has been revealed by
an article in The Times
last week that the Royal Bank of Scotland have admitted to the mis-selling of loans to small businesses under a taxpayer-backed scheme called the Enterprise Finance Guarantee (EFG), and that any business affected will be compensated.

The bank is the biggest user of the scheme, and since 2009 has loaned over £900 million to 9,000 small businesses who would find it difficult to access credit. After several complaints from SMEs and the British Business Bank, the scheme was investigated.

This comes to the relief of Clive May in particular, the owner of a bricklaying business who has been heavily affected by the mis-selling of EFG and was a case that was identified by the Times investigation of mis-selling allegations last August.

The bank suggested he reduced his £245,000 overdraft to £70,000, and replaced it with EFG. May understood the loan meant he would be liable for only 25% of the debt should the business default, and only when this happened did he discover he was in fact responsible
for the entire amount.

RBS has begun to contact at least 1800 businesses who took out a loan under the EFG scheme and have since defaulted, or are under extreme financial pressure. They will also run an ‘accountability review’, meaning that senior positions within the bank could
be at risk.

Business Secretary Vince Cable has asked that the bank put the ‘situation right as quickly as possible so that neither RBS customers or taxpayers are adversely impacted’.

We represent a large number of businesses throughout the UK that have been affected by mis-sold banking products. If you would like more information and practical advice on a particular case, contact
Damian Carter,
Partner and Head of the Berg Banking Litigation Team on 0161 833 9211 or email him at
damianc@berg.co.uk.

 

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