Royal Bank of Scotland is facing allegations of “unscrupulous” treatment of small businesses in a report claiming the lender drove firms to collapse to buy back their assets at rock-bottom prices.
Businessman Lawrence Tomlinson, who is entrepreneur in residence at the Department for Business, Innovation and Skills, said he had uncovered a dossier of evidence alleging that taxpayer-backed RBS has deliberately forced companies into default to seize their properties.
His report into small business lending practices across the sector contains explosive accusations against RBS, which have now been passed to the City watchdogs by Business Secretary Vince Cable.
Mr Tomlinson, who has been compiling the report independently for the past six months, focuses allegations on the turnaround division at RBS – its Global Restructuring Group (GRG).
The division handles loans classed as being risky and is understood to have the power to scrap loan deals, impose inflated interest rates and charge hefty penalties.
But the report alleges that firms not necessarily in immediate financial distress are “engineered” into GRG, sometimes through small technical breaches of loan terms, such as late filing of minor financial information.
They are then hit with exorbitant rates and fees, which in some cases cause them to collapse, allowing RBS to buy their property and assets on the cheap for the benefit of its West Register property arm, according to Mr Tomlinson.
His report claims that fees charged by GRG can run into hundreds of thousands of pounds.
One business that submitted evidence to Mr Tomlinson said that it forked out £256,000 in fees alone while in GRG.
Another said that RBS made them pay an immediate sum of £40,000 to continue borrowing terms with the group.
Mr Tomlinson said he was calling for “immediate action to stop this unscrupulous treatment of businesses”.
The report found a “disproportionately high” number of complaints against RBS, but also found examples of similar practice at other banks.
Fellow part-nationalised player Lloyds Banking Group is also criticised for concentrating on short-term gain at the expense of its business customers.
The report said Santander UK was among a few banks that were praised by small business customers for their treatment.
Mr Cable confirmed that evidence against RBS in the report had been referred to the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
He said: “Some of these allegations are very serious and I am waiting for an urgent response as to what actions have been taken.
“I am, however, confident that the new management of RBS is aware of this history and is determined to turn RBS into a bank that will support the growth of small and medium sized businesses.”