A LEGAL firm that undertakes complex actions on behalf of client groups is planning to take on Clydesdale Bank on behalf of potentially thousands of business customers who bought fixed rate Tailored Business Loans (TBLs) between 2002 and 2012, including those relating to conduct under its trading name Yorkshire Bank and its previous parent company National Australia Bank (NAB).

RGL said it believed that more than 6000 SMEs had legitimate grounds to join the action. Many of those firms that took out TBLs later lost their businesses to insolvency as a result of what RGL said was the fraudulent behaviour of the bank.

The company has received funding to prosecute the litigation from Augusta Ventures, one of the largest and most respected litigation funders in the UK.

RGL said it expected to issue claims this year, with the precise timing dependent on tactical considerations. This meant it could happen very quickly and leave those SMEs with valid claims with little or no time to join. The firm has already recruited a significant number of SME businesses to its group and it has encouraged any business that took out a TBL to contact them at www.sueclydesdale.com.

Given that the funding is already in place, claimants will be able to join the action without making any financial contribution to the costs and without any exposure to an adverse costs order.

James Hayward, RGL’s CEO, said: “Clydesdale’s conduct is actionable and we’ll be suing those involved in order to recover damages for those customers it harmed. Proceedings will probably be issued later this year, however the exact timing is difficult to predict and will depend primarily on what gives us the greatest tactical advantage.” TBLs refer to a brand of more than 11,000 fixed and variable rate loans made to Clydesdale and Yorkshire Bank customers between 2001 and 2012, over 8000 of which were fixed rate TBLs.

These purportedly contained embedded or hidden swaps – sequences of cash flows at least one of which is determined by an uncertain variable. It is claimed these were not disclosed to customers who thought they were entering into a simple fixed rate loan.

The swap or hedging element was similar to that of a standalone interest rate hedging product, in particular, through the purported hedge Clydesdale sought to charge disproportionate and crippling break costs in the event that customers wanted to exit the loan early. RGL said this also had the effect of locking them into higher interest rates and higher bank margins as interest rates fell.

A spokesperson for Clydesdale and Yorkshire Banking Group said: “Whilst we have seen reports of a potential claim being considered in relation to TBLs, we have not received any such claim to date from RGL Management Ltd and it is therefore not possible to comment on speculation around any potential case or the basis for any claim.

“In relation to TBLs, 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.”