A group of small businesses will take Clydesdale Bank to court by the end of the year over loans it claims were missold, according to the litigation firm running the action.
RGL Management confirmed the action will take place this year on behalf of firms who took out “tailored business loans” between 2002 and 2012, after first announcing its intention to take Clydesdale to court in July.
The loans allegedly came with high interest rates and “hidden” break clauses which imposed large penalties on the firms if they tried to pull out, RGL claims.
The claimants number in the “hundreds” with an average claim of £1.6m, although RGL believes more than 6,000 small firms may have grounds to join the action.
RGL is collecting information ahead of launching the action before its own end-of-year deadline, City A.M. understands.
The firm stands to earn 45 per cent of the proceeds of a successful action. In return it covers the costs and indemnity for claimants. The businesses involved receive 55 per cent of proceeds.
Customers signed up for a swap element in their loans to hedge against interest rate movements. However, the hedge resulted in “disproportionate and crippling break costs in the event that customers wanted to exit the loan early”, RGL has said previously.
It also locked customers into higher interest rates (giving Clydesdale higher bank margins) as interest rates set by the Bank of England fell.
Specialist litigation funders Augusta Ventures are the main backers of RGLs’s action. Augusta was founded by an experienced third-party litigation fund manager as well as a former banker at Merrill Lynch.
Clydesdale, established in Glasgow in 1838, remains one the Scottish banks which is allowed to issue its own notes. Its new £10 note entered circulation last week.