Blog: Where next for GRG customer claims?
By Iain McDougall, Senior Solicitor at MBM Commercial
Over the past two weeks there have been a number of revelations regarding the conduct of the Royal Bank of Scotland’s Global Restructuring Group. Where next for bank customers who have had their businesses effected by the conduct on the group?
GRG in the dock
The actions of the Royal Bank of Scotland’s Global Restructuring group have been in the public eye for some time now. Considered by RBS to be its intensive care unit with the remit of helping businesses in financial difficulty to restructure with a view to returning them to “ordinary lending” GRG for many customers was a conveyer belt of bullying, hiked interest rates and consultancy fees which did far more harm than good. For many businesses the only way out of GRG was insolvency.
The accusations that GRG treated customers unfairly and was used as profit centre by RBS are not new. They were the focus of intense scrutiny in journalist Iain Fraser’s book “Shredded – Inside RBS: the Bank that broke Britain”. A brief history of GRG can be found here.
In 2013 Laurence Tomlinson, the then entrepreneur in residence at the Department of Business Innovation and Skills, produced a report finding that GRG had engaged in “heavy handed, profiteering and abhorrent behaviour”.
In response to these allegations RBS commissioned city law form Clifford Chance to carry out their own report on GRG’s contact. Whilst it would appear that this report on the surface gave the group a clean bill of health (with some notable exceptions), controversy continued to surround the group.
Project Dash for Cash
Recent disclosures by an ex GRG employee whistle-blower would appear to confirm what many assumed was what was really going on within the group.
The whistle-blower disclosed a number of internal GRG documents which set out the bank’s criteria for placing businesses within the group. Amongst other things the whistleblower’s testimony brought the following to light, that RBS:
- Placed companies within the group as a result of customers falling out with bank staff or threatening to sue the bank;
- Forced customers in to loan restricting which incurred bank fees as part of a profit drive nicknamed “Project Dash for Cash”.
- Subjected customers to increased interest rates, fines and bank charges.
- Ignored conflicts of interest and passed information regarding distressed assets from GRG on to the RBS’s property group so that assets (shares and property) could be acquired at a low value and “banked” by other entities owned by RBS such as theWest Register Group.
These revelations have gained significant media attention and were subject to an in depth report by Buzzfeed.
Can claims be raised?
From a legal perspective it has been quite difficult to pin the conduct of to an actual legal wrongs which could be used as the basis for a court action against the bank.
Whilst there is no doubt that the department has often treated its customers unfairly or harshly the difficulty we have come across is that often RBS was acting within its rights in putting a company in to GRG. Furthermore in terms of the customers banking facilities GRG were entitled to charge higher rates of interest or appoint consultants to carry out business reviews.
There is no doubt however that is some cases GRG stepped over the line and committed an actionable legal wrong. The recent disclosures will certainly make it easier to identify cases where a legal case may exist against GRG.
Some inroads have been made in the English Courts in terms of suing the bank for exercising bad faith in its dealings with customers and class action is also underway.
The possibility of a Financial Conduct Authority Led Review
It’s no surprise that the actions of GRG have prompted some action by the Bank’s regulator, the FCA. A report on the conduct of GRG was commissioned by the FCA in 2014. It is believed that this report is in its final draft and that it is currently with RBS for review prior to its publication. The report is long delayed.
There has been speculation that this report could contain a recommendation that a review scheme be set up by the FCA for GRG customers. There are currently no details as to how such a scheme would operate, the criteria for customer inclusion in it, what the criteria for “unfair treatment” is or how the bank would ultimately go about delivering adequate redress to customers.
Having assisted a number of clients through the FCA’s review scheme for the miss-selling of interest rate hedging products clear testimony and thorough submissions will be key in terms of customers getting the most of any such scheme.