Many SMEs who were sold complex Tailored Business Loans (“TBLs”), such as Discounted Fixed Range Rate, Modified Participating Fixed Rate and Range Rate Loans, by Clydesdale Bank will have already complained in recent months under the Review of Interest Rate Hedging Products. Many of the complaints, such as those that have been submitted by Taylors’ clients, we know to have been upheld – and with significant compensation sums paid.
But what about those Clydesdale and Yorkshire Bank customers sold a more “simple” tailored business loans, like Discounted Fixed Rate Loan or a Fixed Rate Flexible Maturity Loan? Those customers can complain to Clydesdale Bank by following the bank’s usual complaints procedure, but will their complaints be upheld and will fair and reasonable redress be paid?
From 2005 onwards, many customers were sold fixed rate TBLs. It is understood that Clydesdale employees were highly incentivised to sell TBLs because of the commissions paid to treasury staff when loans were traded. Customers were not told that they were entering into highly complex loan agreements which potentially exposed them to huge liabilities; rather they were told that it was “good to have a mixed bag of loans” and congratulated customers on their choice.
Many customers thought that they had been sold “traditional” fixed rate loans, only to learn when they wanted to redeem the loan early or re-structure it, that they would have to pay enormous break costs. Most customers did not know that, from the date the loan was traded, they had exposed themselves to break costs in the future. Not only did customers not know their liability to pay such costs, the bank either did not explain how the break cost was calculated or, if it did, such calculation was completely incomprehensible. There have even been instances where a customer has re-financed, paid a break cost and the bank did not even tell them. Break costs were simply added to the new loan and customers were none the wiser.
Other customers were hit by Clydesdale’s decision from 2010 onwards to move away from commercial lending. These customers were told that they were no longer welcome to be bank customers, and that they had to redeem their loans and pay break costs.
All is not lost for SMEs sold TBLs. Complaints can be made to the bank, to the Financial Ombudsman Service and potentially Court claims can be issued.
If your business entered into a TBL and you didn’t know what you were getting into, please get in touch. Taylors is different from the vast majority of commercial law firms in that we do not have any allegiance to the banks. We are not on any “bank panels”. With our expertise, we can offer businesses a resolute and comprehensive service.