Litigation funder Augusta Ventures has put £2.7m to a group claim bought by RGL Management against Clydesdale Bank.
The claim was launched over a number of Tailored Business Loans (TBLs) that were allegedly mis-sold and pushed a number of businesses into insolvency.
RGL estimates the claim entitles more than 6,000 small and medium-sized enterprises (SMEs) to take action against the Scottish bank, including when it was trading as the Yorkshire Bank. Its previous parent company, the National Australia Bank, may also face claims.
The total value of the claim is not yet known as it will depend on the number of claimants in the action, but RGL said it is “confident it will be bringing a substantial claim”.
The claim is likely to be issued this year, depending on how much time is needed for the relevant SMEs to join up. Claimants have been told they can join the action without making any financial contribution to the costs and without any exposure to an adverse costs order.
RGL says it has already recruited a significant number of SME buinesses to its group and has encouraged any businesses who took out a TBL to join the action.
James Hayward, CEO of RGL, said: “Clydesdale’s conduct is actionable and we’ll be suing those involved in order to recover damages for those customers it harmed. Proceedings will probably be issued later this year, whoever the exact timing is difficult to predict and will depend primarily on what gives us the greatest tactical advantage. Anyone wishing to join the action should get on board quickly or risk being left out.”
Clydesdale and Yorkshire Bank made more than 11,000 fixed and variable rates loans to its customers in 2001 and 2012. More than 8,000 of these are alleged to have contained embedded or hidden swaps that were not disclosed to customers.
RGL claims that Clydesdale sought to charge “disproportionate and crippling break costs” if the customers wanted to exit the loan early. The undisclosed conditions effectively locked customers into higher interest rates and bank margins as interest rates fell during the financial crisis.
RGL is the latest litigation funder to muscle in on group claims. Last month, The Lawyer reported that Therium Capital Management had funded a £3.9bn compensation claim against a number of European truck manufacturers who were found by the European Commission to have engaged in illegal price fixing for 14 years.
Michelmores partner Garbhan Shanks will instruct head of chambers at 3 Hare Court Simon Davenport QC on behalf of the claimants. It is not yet known who is acting for Clydesdale Bank.
A Clydesdale Bank Group spokesperson said: “Whilst we have seen reports of a potential claim being considered in relation to Tailored Business Loans, we have not received any such claim to date from RGL Management Ltd and it is therefore not possible to comment on speculation around any potential case or the basis for any claim.
“In relation to Tailored Business Loans, this is a long-standing historical matter which has been subject to significant scrutiny and which the bank has been working through with customers as part of a wide-ranging remediation programme, in an open and transparent manner.
“We have made significant progress in resolving the vast majority of cases. Where we have reached a final agreement with customers, the cost of this has been covered by existing provisions as extensively disclosed in our financial reports.”