🔥 Premium AI-powered Stock Picks from InvestingPro Now up to 50% OffCLAIM SALE

Clydesdale Bank and National Australia Bank face £400M lawsuit over alleged loan mis-selling

EditorAmbhini Aishwarya
Published 10/10/2023, 11:26
© Reuters.

In a recent development, Clydesdale Bank, now part of Virgin Money (LON:VM), and its former owner, National Australia Bank (OTC:NABZY) (NAB), are facing a High Court trial over allegations of unfair break fees on tailored business loans. The banks are being sued by RGL Group led by James Hayward, representing four firms and a larger group of 900 small businesses. The case could potentially cost the banks hundreds of millions of pounds.

The plaintiffs allege that the banks mis-sold complex interest swap loans to thousands of small and medium-sized enterprises (SMEs) between 2002 and 2010. They claim losses due to early repayment break fee costs and fraudulent misrepresentation of the fixed loan rate, which included an unexplained “added value” income element. The barrister for the plaintiffs, Andrew Onslow KC, is demanding damages for breach of contract or restitution for unjust enrichment.

Specific allegations include falsely demanding break costs for early loan terminations and adding a hidden margin to inflate interest rates on fixed rate commercial loans. This lawsuit comes as part of a broader scrutiny on banking practices related to SME lending.

In response to these allegations, Clydesdale Bank has refuted RGL's claims. Defending the banks, barrister Bankim Thanki KC denies all allegations and asserts that the loan terms justified the break costs. He also refutes the alleged misrepresentations by bank staff. Clydesdale Bank had previously suggested such practices were widespread in the industry as a defence.

As of Tuesday, National Australia Bank has not yet responded to these allegations. The unfolding legal battle marks another significant event in the ongoing scrutiny of bank lending practices to SMEs.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.