A SCOTS businessman has told how he has lost almost £1 million after a battle with the Clydesdale Bank that has raged for eight years.
St Andrews hotelier James McGrory has passed on his bulging file to RGL Management, a legal firm that is preparing a case against the bank on behalf of business customers who bought fixed rate tailored business loans (TBLs) between 2002 and 2012.
McGrory’s troubles go back to 2007 when the Clydesdale offered him a new £562,000 loan, and was persuaded by his manager to take a fixed-rate loan. For this, he said he would normally expect to pay a “break” fee if he repaid the loan early – a percentage of the loan, or around six months of interest payments.
He presumed this was the same type of contract, but he was mistaken – and he was not alone.
Tens of thousands of small businesses had no idea this new type of fixed-rate loan could include an embedded breakage fee, which could amount to between 20 and 40 per cent of the loan – 10 times the cost of traditional loans.
McGrory’s contract – and his terms and conditions document – included a one-line reference to possible “break costs”, which he envisaged would be around £20,000.
In 2010, when Clydesdale refused him an overdraft, McGrory went to Lloyds Banking Group which said it would cover his exit costs, which his manager had quoted at £18,000. However, a few days later the manager called him to say the exit cost was £81,000.
McGrory said: “We had a meeting with the bank and my accountant told them £81,000 was scandalous. They said it’s now £88,000, because of the market. I said you have sold a small businessman a product des-igned for PLCs or governments.”
McGrory pursued the case through the Financial Ombudsman Service, which initially found in favour of the Clydesdale, a decision that was reversed in 2013. The ombudsman found that McGrory was mis-sold the TBL, and that the bank should put him back to the position he was in before the loan was issued.
Clydesdale offered him £142,000 in settlement, but he claimed he had suffered £502,000 in consequential losses through the forced sale of properties, including a house in Canada.
“I’ve lost almost £1m in the process after 55 years of work,” he said. “And the bank constantly said, ‘We’ve done nothing wrong, the ombudsman found in our favour’. But it changed its tune in 2013 and said they would absorb the break clause cost. The new situation is there was no break clause or third party and there was no hedge.”
The case even found its way to Westminster last year, where a meeting between McGrory and the Clydesdale was brokered by his MP Stephen Gethins and attended by, among others, MPs Stewart Hosie and George Kerevan.
Gethins said questions remain about the case: “I’ve been representing my constituent to try to get answers out of the Clydesdale Bank as well as helping him with the Inland Revenue. It’s clear it’s a case we need further answers on and I’ll continue to work with Jim for as long as he needs my help.”
RGL’s CEO James Hayward, said: “We are excited to have seen sig- nificant interest in this claim already, but know that there are many more former Clydesdale customers out there who lost substantial amounts when they bought these products.
“We encourage those whose businesses were harmed to join us now and take advantage of the funding and expertise provided.”
A spokesman for the Clydesdale and Yorkshire Banking Group (CYBG) said: “Mr McGrory’s case was considered by the independent Financial Ombudsman Service and Clydesdale Bank agreed to abide by the determination.
“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 and it is therefore not possible to comment on speculation around any potential case or 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.”
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