NAB/Clydesdale Bank {virgin Money} Class Action

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National Australian Bank/Virgin Money Misconduct

RGL Management have filed a class action in the High Court of England and Wales in relation to misconduct by NAB/Clydesdale Bank {Virgin Money} associated with so-called "Tailored Business Loans" that were marketed in the United Kingdom from 2001 to 2012.


The litigation funder Augusta is backing the class action.


It is planned to expand the class action to Scottish victims..

'Fees For No Service'

The alleged misconduct could be described as 'Fees for No Service' since SME customers accepted an offer for a variable interest rate loan in writing from Clydesdale Bank {or Clydesdale Bank trading as Yorkshire Bank}.


NAB Treasury Representatives in the UK encourage customers with 'Tailored Business Loans" to obtain interest rate movement protection insurance and offered to arrange a 'Hedging Arrangement' on behalf of the customer.


However no such insurance arrangement were ever put in place as admitted by former Clydesdale Bank, CEO David Thorburn, before a House of Commons Treasury Committee in 2014.


Nevertheless insurance premiums were deducted from the customer's account for an insurance 'service' that was never provided?


Were there any 'Hidden' or 'Embedded' Swaps?

If the written loan contact contained a so-called 'Hidden Swap' then the contract would be void for uncertainty unless the uncertain term can be severed and the remaining contract can then stand.


If the written loan contact contained a so-called "Embedded Swap' then three parties would have needed to have executed the written loan contact document. Namely:


- the Lending Bank;

- the Borrower; and

- the Third Party {Counterparty} to the Interest Rate Swap contract {agreement}.



Does an Interest Rate Swap convert a Variable Interest Rate Loan into a Fixed Interest Rate Loan?

No. This is dis-information spread by NAB/Clydesdale Bank.


A borrower who has a variable interest rate loan facility can 'fix' their monthly payment obligations, while the lending bank continues to receive variable payments that depend on movement in an interest rate benchmark such as LIBOR.


If an Interest Rate Swap (IRS) contract is matched to the variable interest rate contract, then if interest rates increase above an agreed rate, the counterparty to the IRS {the 'Third Party'}  has a legal obligation to make periodic payments into a nominated account, so that the borrower's monthly payment remains 'fixed'.


 Conversely, if interest rates fall below the agreed rate, then the borrower should have authorise the lending bank to allow periodic payments to be taken from the nominated accounts so that 'premiums' due on the IRS 'insurance' contact can be paid to the 'Third Party' who has agreed to provide interest rate movement protection insurance..



What is a 'Fixed Rate Loan'?

Is a so-called 'Fixed Rate Loan' a:


 - Fixed Interest Rate Loan? or a

- Fixed Payment Rate Loan?


That will be a matter for the High Court of England and Wales to decide, utilising the 'Canons of Construction'.



Diagrams

 In the case of a bona fide Interest Rate Swap three parties are involved. Therefore diagrams become an important tool in understanding the relationships and the flow of funds.

FCA Fines clydesdale bank

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Payment Protection Insurance (PPI) Misconduct

In 2015 when Clydesdale Bank was owned by the National Australia Bank, the UK Financial Conduct Authority (FCA) fined Clydesdale Bank Plc (Clydesdale) £20,678,300 for serious failings in its Payment Protection Insurance (PPI) complaint handling processes .


 In addition, between May 2012 and June 2013, Clydesdale provided false information to the Financial Ombudsman Service in response to requests for evidence of the records Clydesdale held on PPI policies sold to individual customers 

  

Georgina Philippou, acting director of enforcement and market oversight at the FCA said:


"Clydesdale’s failings were unacceptable and fell well below the standard the FCA expects.  The fact that Clydesdale misled the Financial Ombudsman by providing false information about the information it held is particularly serious and this is reflected in the size of the fine".


 

Mortgage Misconduct

  

 In 2013 when Clydesdale Bank was owned by the National Australia Bank, the UK Financial Conduct Authority (FCA) has fined Clydesdale Bank (Clydesdale) £8,904,000 for failing to inform its customers clearly of their rights after the bank miscalculated the repayments on over 42,500 mortgages.



Clydesdale failed to pay due regard to the interests of its customers and treat them fairly after it discovered an error in how it had calculated some of its customers’ mortgage repayments





Future Fines?

In 2016 the National Australia Bank demerger Clydesdale Bank into CYBG plc.


Clydesdale Bank has provided false and misleading information to the Financial Ombudsman Service in response to requests for evidence of the records Clydesdale held on so called 'Fixed Rate Tailored Business Loans' sold to SME customers between 2001 and 21012.


 Clydesdale Bank represents such loans as 'simple Fixed Interest Rate Loans" which do not fall under the supervision of the UK Financial Conduct Authority (FCA) and fails to mention that the SME customers were offered Variable Interest Rate Loan facilities and that such offered were accepted in writing.


An offer to provide interest rate movement protection insurance in the form of a 'Contract for Difference' known as an Interest Rate Swap contract was priced, but never executed with an identifiable counterparty {'Third Party'} as referenced in Condition 8.1 of the associated Terms & Conditions document. 

Contracts for Difference

The UK FCA is authorised to regulated Contracts for Difference under the Financial Services and Market Act 2000. Clydesdale Bank claims that the FCA has no regulatory powers of 'Fixed Rate Tailored Business Loans" since there are no Interest Rate Swaps directly associated with such loan facilities.

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Diagrams

 In the case of a bona fide Interest Rate Swap three parties are involved. Therefore diagrams become an important tool in understanding the relationships and the flow of funds. .