Pressure grows on banks over loans
High street lenders and the government are under pressure to review a taxpayer-backed lending scheme after Royal Bank of Scotland admitted that it had misused the Enterprise Finance Guarantee.
Labour joined small business groups in calling for a broader inquiry into banks’ use of the EFG after an internal investigation at RBS revealed serious failings in how it explained the scheme to customers.
The EFG, which has facilitated more than £2.3 billion in funds to small businesses since its launch in 2009, provides a 75 per cent government guarantee to banks willing to back small companies that lack the security for a conventional loan.
Last week The Times revealed that RBS would conduct a “loan by loan” review of its use of the EFG after it admitted that some customers were misled that the state guarantee was for the borrower’s benefit. The guarantee is only for the lender, with customers remaining liable for the entire unsettled value of the loan.
Lloyds, HSBC and Barclays do not have plans to review their use of the scheme, all highlighting that they are subject to regular audits by the state British Business Bank, which runs the EFG.
However, Andy Keats, who co-runs the Serious Banking Complaints Bureau, said that he had been approached by EFG borrowers from all the main high street lenders complaining about how the scheme had been explained.
“I’m pleased that RBS has held its hands up,” he said. “This will put pressure on other lenders who have been doing exactly the same thing. It’s disgraceful that 100 per cent of liabilities have been claimed from people on a loan that was mis-sold in the first place.”