Virgin Money owner CYBG? faces new salvo in SME loans fight
Sky News understands that CYBG, which owns the Clydesdale and Yorkshire banking networks, is being targeted by a group comprising two specialist claims management firms which plan to seek hundreds of millions of pounds in compensation.
The case relates to thousands of so-called Tailored Business Loans (TBLs) containing interest rate swaps that were not clearly explained to customers and are understood to have been sold to SMEs by Clydesdale Bank between 2001 and 2012.
RGL Management, which has been co-ordinating a group of claimants since last year, will announce on Tuesday that it has formed a joint venture with All Square Finance, a Leeds-based specialist in pursuing business banking claims.
The statement is expected to say that the claimant group is on the brink of hitting 500 members, with hundreds more expected to join before a complaint alleging fraud and dishonesty by the Clydesdale is formally served against CYBG.
The precise size of the prospective claim is unclear, but insiders have previously estimated that the individual SMEs would seek damages ranging from several hundred thousand pounds to multimillion pound sums.
A CYBG insider said there had been “no new developments” since last year, and expressed scepticism about the group’s plans in the absence of a claim being formally lodged.
CYBG recently completed a £1.6bn takeover of Virgin Money.
The prospective case contains echoes of allegations of misconduct against Royal Bank of Scotland’s Global Restructuring Group, the unit which handled SME clients facing financial difficulties, and the use of Interest Rate Hedging Products by a number of banks.
Although RBS dodged the most serious allegations of systematically engineering problems for SME clients, the behaviour of some employees remains one of the biggest stains on the state-backed lender’s post-bailout reputation.
The slashing of interest rates in the wake of the 2008 banking crisis sharply forced up the cost of the TBLs made to roughly 8300 Clydesdale business customers.
The legal claim is expected to allege that these SME customers believed they were taking on a simple fixed-rate loan, and that the TBLs therefore represented fraudulent behaviour on the part of CYBG.
One insider last year suggested that the aggregate value of the claims against Clydesdale could run to several hundred million pounds – a significant sum for the UK’s sixth-largest banking group.
That figure, however, would be dependent upon the number of claimants who signed up, and the success of their legal action.
In 2016, the Financial Conduct Authority (FCA) said that a review set up to address failings in the way nine banks – including CYBG – had sold these loans had led to £2.2bn being paid out in redress.
That figure included £500m in consequential losses, which refers to money not directly connected to the mis-sold loans but which was lost by customers because they had bought the products from the nine lenders.
The claim against Clydesdale and National Australia Bank, which owned it during the relevant period, is being funded by Augusta Ventures, a litigation funding specialist, and is expected to be issued early next year, according to insiders.
Michelmores, the law firm, is leading the action on behalf of the claimants.
