Clydesdale Bank loan misselling case begins in High Court as claimants seek £400m
A £400m High Court case against Clydesdale Bank kicked off today with claimants alleging that business account customers paid hundreds of millions of pounds in unnecessary expenses.
Clydesdale, now part of Virgin Money, and its former owner National Australia Bank are accused of misselling loans containing complex interest swaps to thousands of business customers between 2001 and 2012.
RGL Group, the body responsible for running the claim, allege that the banks falsely demanded break costs from borrowers who sought to terminate fixed rate business loans early.
This meant they faced high break costs when interest rates fell shortly after the financial crisis.
It is also claimed that the banks “deliberately and systemically” inflated the fixed interest rate payable with ‘added value’ margin before applying their agreed profit margin.
The trial comes after over four years of legal process. The first case was filed in May 2019 with subsequent tranches of claims filed in August 2019, October 2020, September 2021 and February 2023.
James Hayward, chief executive of RGL Group, said: “It has taken many years to arrive at the trial of this group litigation. The funding and insurance arrangements that have allowed the RGL Group to reach the steps of the Court remain in place, and the confidence of the claimants’ legal team in the merits of the claims has not wavered.”
In a pre-trial hearing in March, the bank sought to cite evidence that the practice was widespread in the industry in its defence.
“It will be of interest to SME businesses as a whole that adding hidden margin to fixed rate commercial loans may well have been widespread among UK banks for many years,” Hayward said.
A spokesperson for Clydesdale Bank said: “There is absolutely no merit in the allegations made in RGL’s claims, which involves four live claimants. We remain confident of defending our position.”
National Australia Bank was contacted for comment.