A CLASS action by hundreds of small firms which took out complex business loans with Clydesdale Bank in the run up to and immediately after the financial crisis is on track to be launched within months.
And RGL Management, the claims firm leading the action against both Clydesdale owner CYBG and its former parent National Australia Bank (NAB), declared its intention to sue the banks “for as long as it takes to get as much money as possibly for its claimant group”. ‘
RGL chief executive James Hayward signalled its determination to take the action to court, claiming that the case was “exceptionally strong”.
He said: “We have a large and ever-increasing group of claimants, so the quantum that we are claiming is increasing every day. We are fully resourced, we are fully funded, [and] we are prepared to sue these banks for as long as it takes, to get as much money as we possibly can for our claimant group.”
RGL revealed the legal timetable for its action at an event near Glasgow yesterday, where current and former customers of the banks had the chance to meet its team and learn more about the claim. Around 50 claimants attended.
The update comes after RGL announced shortly before Christmas its intention to pursue the banks for damages on behalf of customers who had taken out tailored business loans (TBLs) from Clydesdale and sister bank Yorkshire between 2001 and 2012. The banks were spun out of NAB and floated on the stock exchange as CYBG in 2016.
CYBG repeated yesterday that the allegations it received in a letter before action (LBA) from RGA before Christmas are “not accepted by the bank and if necessary will be defended in the strongest terms possible.”
Mr Hayward revealed that, following the initial response RGL had received from the banks, it will set out its next move in a follow-up letter to the institutions today.
RGL said that communication will impose a deadline of May 4 for the banks to provide their defence against the allegations put to them. Depending on the position set out by that response, RGL said it will look to issue legal proceedings in “mid to late 2018”.
“We’re not looking to settle this in way shape or form,” Mr Hayward said. “We’ll get a greater quantum of damages from court action.”
TBLs were a brand name given to more than 11,000 fixed and variable of business loans made to Clydesdale and Yorkshire customers between 2001 and 2012.
Of that number, more than 8,000 were fixed rate TBLs, which RGL alleges came with hidden fees in the shape of hedging arrangements or “swaps”. It is claimed the swaps were not disclosed to customers.
The products were designed to help small business customers hedge against increases in interest rates. However, it is claimed that the interest rates on the loans did not fall when the base rate dropped, as it did in the aftermath of the financial crisis of 2008 and 2009. It is also alleged that excessive break fees were applied when any customer sought to exit the loan.
RGL, whose case in focused on fixed-rate TBLs, said these break fees came as a “huge surprise” to customers and in some cases prevented business owners from refinancing their loans. According to Mr Hayward, such fees led customers to suffer “direct” and “indirect” losses. Some of RGL’s claimants are no longer in business.
RGL signalled that the claim could be worth up to £1 billion when it revealed it had sent the banks a letter before action (LBA) shortly before Christmas.
Speaking yesterday, Mr Hayward said the firm has “quantum experts” working on the exact value of the claim. However, he said that with the claimant group steadily growing, the “quantum of what we are claiming is increasing all Increasing all the time.” Mr Hayward added: “It is huge.”
He emphasised that customers which have already received compensation from the banks under their own redress scheme were eligible to join the RGL action. He said it was important customers make the distinction between the compensation scheme and the legal case, claiming that the bank’s scheme would not have looked at any “consequential losses” customers may have incurred.
“It is a mistaken impression,” Mr Hayward said. “The compensation available to us is whatever loss which was caused – that is the legal measure of damages – whereas an administrative tribunal-type system will do what they think is fair and reasonable.”
Mr Hayward said that RGL was speaking to Scottish law firms which could potentially represent claimants in Scotland as part of a joint action with claimants south of the Border. This is subject to legal arguments and the banks’ position on jurisdiction, he added.
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