Managers at Clydesdale Bank would be prepared to cooperate with a full-scale investigation into thousands of loans handed to small businesses over the last 13 years, a parliamentary committee heard yesterday.
Grilled by MPs on Westminster’s Treasury Select Committee, chief executive David Thorburn said the bank would comply if politicians insisted on a full review of its as-yet unregulated tailored business loan (TBL) book.
The products which have come under fire from customers who allege they were not pre-warned of break costs running to as much as a quarter of the sum borrowed are currently excluded from a Financial Conduct Authority review into the mis-selling of interest rate swaps which has already seen a string of major lenders set aside £2 billion in redress payments.
Under questioning as part of the committee’s ongoing inquiry into small business lending yesterday, Mr Thorburn repeatedly insisted the products did not contain embedded interest-rate swaps but later admitted that they behaved as though they did, and conceded that the distinction made little difference to customers.
He said the loans were aggregated by parent firm National Australia Bank before being subjected to a group-wide hedge.
However, campaigners claim the high charges and difficulties in rebanking could have cost thousands of jobs across the UK, with other lenders also in their sights.
The most complex of the TBLs which contain collars, and account for around 20% of the total number sold have already been included in a review by the bank. Sales of these products ceased in 2012.
Of the remaining 8,372 ‘fixed-rate’ loans, around 550 are currently being re-examined in the wake of complaints by customers.
That process is now around half complete, with redress offers having been agreed with “around 50 customers” and negotiations continuing in around 100 further cases.
Appearing alongside National Australia Group’s European executive director for customer trust and confidence Debbie Crosbie, Mr Thorburn said around two-thirds of the fixed-rate TBLs were now off the bank’s books following successful refinancing or the loan term coming to an end.
He conceded that the bank could have provided better information and greater clarity to its customers, but argued that no one had foreseen the plummeting emergency interest rate which immediately followed in the 2008 banking crash and had the effect of driving up break fees.
Clydesdale will make redress where the bank believes its sales process fell short, the duo added.
“We’ve looked very hard at what went wrong with some of these products, and it’s a matter of great concern and regret to us,” Mr Thorburn said.
John Thurso MP was one of several members to cite unhappy Clydesdale customers who had complained about being “bombarded” by salespeople, “forcing” new loan arrangements upon them and “clear deceit” from the bank.
Mr Thorburn said his evidence was that this behaviour was “not widespread”, though he acknowledged that the products had been for sale during a period in which the bank was “trying to grow quite fast”.
The appearance came as it was revealed that the Clydesdale paid out £250,000 to a Scottish small business after the Financial Ombudsman Service rejected its claim it had not mis-sold one of the tailored business loans.
The bank last month upped its compensation provision to £128 million, and warned that even greater allowance may be required. Yesterday, Mr Thorburn said the total paid to customers so far was less than £10m.