The Royal Bank of Scotland is facing a group legal action from hundreds of business owners, it emerged today.
The group legal action, comprised of business owners from small and medium-sized companies, is centred upon the bank’s ‘turnaround’ division, the Global Reconstructing Group (GRG). It is alleged that the group exploited businesses through applying exorbitant fees to their services and undervaluing company assets, delivering many to the brink of collapse.
The allegations were first published last year in a report by Lawrence Tomlinson, a former government adviser.
The class action case is being orchestrated by the RBS GRG Business Action Group, which has appointed the law firm Clyde & Co to review the allegations. The group has said that 800 companies have so far come forward for consideration, and 200 cases were being reviewed in detail with a view to form a group litigation case.
RBS denies the allegations and in response commissioned Clifford Chance, the law firm, to investigate Tomlinson’s report, which rejected Mr Tomlinson’s “central allegation” but conceded that GRG’s fee structure “lacked clarity.”
The RBS boss has defended the turnaround team as a “pretty good unit” that was “under a huge amount of pressure.” However, earlier this year shareholders accused the bank of “covering up” for GRG’s “corporate psychopaths.”
It is likely that the inquiries will also seek to uncover the government’s knowledge of GRG’s activities. It has emerged that the APA, a government agency responsible for insuring RBS’s loans, successfully put pressure on RBS to be tougher on smaller businesses.
Businesses taking part in the claim are expected to contribute to help fund any legal action, but there may be a ‘no win, no fee’ option for companies that lack the sufficient resources, an official GRG Business Action Group spokesperson said.
Mr Tomlinson has acknowledged that it would be difficult for any official compensation scheme to be implemented.
“I don’t know how you can unwind this. Many people have ended up in administration, at food banks almost, with lives and multi-generational businesses destroyed.”
Earlier this year the RBS announced plans to close down the GRG due to improving economic conditions.