Reuters | Oct 15, 2020 20:10
By Kirstin Ridley
LONDON (Reuters) - Almost 370 businesses have joined a group action suing Clydesdale Bank (L:VMUK) and its former owner National Australia Bank (AX:NAB) in a dispute over small business loans that is set for its first day in London's High Court in December.
The group, which alleges businesses were deceived between 2001 and 2012 when buying fixed rate Tailored Business Loans (TBLs), has snowballed since last year's launch and now represents 509 smaller businesses and 867 individual loans, according to claims management company RGL Management.
RGL, which filed the latest tranche of claims on Thursday, alleges smaller businesses were wrongly told they faced hefty costs for terminating fixed-rate TBL loans early and that banks inflated interest rates.
RGL is alleging deceit, misrepresentation, breach of contract and unjust enrichment by the banks, adding that TBL borrowers "unknowingly and unnecessarily paid hundreds of millions of pounds" of additional costs and interest.
Clydesdale parent Virgin Money (LON:VM) UK dismissed the case as without substance or merit, adding it would continue to defend its position robustly.
"Over recent years we have worked hard to investigate all historic SME (small and medium-sized enterprise) conduct issues and we are confident we have done the right thing for those customers involved," a spokesman said.
NAB said it did not comment on matters before the court.
A one-and-a-half day pre-trial hearing has been scheduled between Dec. 14 and 16.
More than 6,000 customers of Clydesdale and its Yorkshire Bank brand bought around 8,000 TBLs with embedded interest rate hedging features, classified as unregulated, commercial loans, that left customers facing heavy costs to unwind the hedge if they wanted to renegotiate the loan as interest rates fell.
Abhishek Sachdev, a derivatives expert, says a vast number borrowers, ranging from unsophisticated SME customers to large local authorities, were sold derivatives embedded into loans without their knowledge or understanding.
($1 = 0.7674 pounds)
Written By: Reuters
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