RBS probes mis-selling claims

Tim Wallace
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SMALL businesses who took government-backed export loans from RBS have complained that the product was poorly explained and left them facing unexpected costs, the bank said yesterday.

Under the export finance guarantee (EFG) scheme, RBS made loans to small firms which would otherwise have been ineligible for credit.

If the firm defaulted, 75 per cent of the loan was guaranteed by the government, through the British Business Bank, reducing RBS’ losses.

But some small- and medium-sized enterprises (SMEs) who used the service thought they were the ones receiving the guarantee.

As a result, when they defaulted on their debts they had expected to be bailed out, rather than RBS getting paid back by the government.

RBS has been a major user of the EFG scheme, giving 9,000 firms loans totalling £900m.

The bank has agreed to restore firms to the financial position they had expected to be in, given their understanding of how the product would work.

It is expected to apply to a very small number of customers – RBS has looked at 1,800 distressed firms, of whom only 320 have defaulted.

It is only at the default that the guarantee comes into play, and so at which the firm would realise it had misunderstood the product.

RBS executive Alison Rose said she is improving sales staff training.

“We have now made sure that EFG loans will always be given appropriately. We are implementing a thorough and proactive review of affected, and potentially affected, customers,” she said.

“Any customers that have been affected will be contacted directly by the bank to ensure they are put back in the position they believed they would have been in.”

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