Police investigating RBS for ‘loan abuse’

RBS stands accused of abusing the enterprise finance guarantee scheme

Police are investigating allegations from a small business owner that a Royal Bank of Scotland employee dishonestly transferred the lender’s liability on his company to the taxpayer.

Detectives from the financial crime unit at North Wales police visited RBS’s headquarters in London last week to look into claims from Clive May, who has accused the bank of abusing a government-backed loan scheme designed to boost lending to small companies.

The case relates to the enterprise finance guarantee, in which the government acts as guarantor on 75 per cent of the liability on individual bank loans.

The scheme is designed to help viable companies to access finance when they do not have enough security to satisfy a high street lender’s collateral demands. It has helped to facilitate £2.5 billion of bank credit to almost 24,000 small businesses since it was launched in 2009.

RBS is its biggest user. One of the bank’s relationship managers told Mr May, who is based in Mold, north Wales, to remove valid security — a second home — from the application form for one of the taxpayer-backed loans in December 2010. The property should have disqualified C May Brickwork, Mr May’s company, from securing a guarantee. However, a second form that did not refer to the property was submitted to the business department by RBS-owned NatWest, allowing the government-backed loan to be drawn. C May Brickwork subsequently failed when RBS withdrew its overdraft.

The reasons for the removal of the security are disputed. RBS has offered varying explanations, including a suggestion that it thought that the property was owned by Mr May’s wife. However, Mr May claims that bank correspondence he has obtained shows that the lender had recorded the true status of the security in its internal records before the EFG application was made.

An RBS profile of Mr May’s “means” says he owns two houses. After his complaints, RBS released him from his liability on the EFG loan. The bank apologised in January after admitting serious failings in how it explained some EFG loans, with certain customers incorrectly told the taxpayer guarantee was for their benefit. In fact, it was solely to cover three quarters of lenders’ liability on individual loans.

An internal review into the mis-selling is being overseen by Andrew Lewis, the bank’s head of capital and transaction management. It is understood that RBS has run its own inquiry into Mr May’s allegations and is cooperating with the police investigation. North Wales Police and RBS declined to comment.

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