RBS faces backlash for pursuit of govt-guaranteed loans

Royal Bank of Scotland is facing criticism for pursuing the owners of small and medium-sized companies for debts that have already been settled by the government in a taxpayer-backed loan scheme.

The parliamentary group on fair business banking said it would report its concerns regarding the bank’s treatment of small and medium businesses that used the Enterprise Finance Guarantee scheme to the Treasury.

The program was set up to help banks support small businesses and grant them loans, offering to make up 75% of their value if they were unaccounted for. Over a decade, the scheme underwrote around £3.25bn of credit to tens of thousands of small companies.

According to the report, RBS misled some owners of businesses and told them they were liable for 25% of the loan and that the state would cover the rest. Back in 2015, it paid back £4.7m wrongfully claimed from the government and £3.5m to customers to whom it deemed it had mis-sold loans.

Several small business owners told The Times they feared bankruptcy after RBS ordered repayment of debts that had allegedly already been settled with the government and for which they were unaware they were personally liable for.

Borrowers reported they were being pursued through the courts for debts from state-backed loans written as long as a decade ago even after claiming on government guarantee and saying they had been misled by RBS.

RBS said it was seeking repayment only in those instances in which it believed it had not mis-sold loans and that it was following a normal recovery process.

The lender can still claim the money as long as it returns the relevant portion to the state.

Kevin Hollinrake, co-chairman of the parliamentary group, said: “It is extremely concerning to learn that the bank is pursuing people for debts the government may have covered, on loans borrowers say they were misled over.”