BBC News 14 September 2015
In the wake of the 2008 financial crash, builders and developers were left with large loans from Dunbar Bank which they were unable to repay. Instead of offering support, customers claim the bank was ruthless in its pursuit to recoup the money. But did Dunbar Bank act unreasonably?
Days after the death of his wife Pauline in March 2013, property developer Ric Francis received a letter from Dunbar’s receivers.
The couple were already engaged in a legal battle with the bank after Dunbar, a part of the Zurich group, had demanded they repay in full a £10m loan, when the fresh correspondence arrived.
“They demanded her wedding ring, watch, personal belongings, personal jewellery; basically what belonged to Pauline,” he said.
For more than 20 years Mr and Mrs Francis, of Thornham in Norfolk, had borrowed money from Dunbar while developing projects like Hartford Marina in Huntingdon.
When Mrs Francis was diagnosed with terminal throat cancer, Mr Francis says Dunbar froze her sickness benefit account.
“Then they came after the house,” said Mr Francis, adding: “So we were up against the wall.
“We had to take the pain and suffer what was thrown at us.”
The court action is continuing but Mr Francis is adamant that Dunbar will not get his wife’s jewellery, and the BBC understands no further demands have been made for it.
The Francis case has shocked Alison Loveday, a financial lawyer for Berg Legal.
“I think it shows the complete disregard they had for any type of human compassion,” she said. “Our experience ranges across all of the major banks and the enforcement action that we understand Dunbar has taken is at the most extreme.”
Dunbar said it recognised debt recovery could be “difficult and distressing”, but it “strongly rejects claims it acted inappropriately”.
Ric Francis is one of 70 Dunbar customers, bankrupted by Dunbar, who are fighting back.
The Dunbar Action Group is led by two builders from Whitley Bay. Ben and Coryn Warren once had a thriving building company. After the crash they say Dunbar demanded they pay off part of a loan taken out to develop apartments, but they could not do it. Eventually, they were told to repay the full loan of £1,666,060.
“We had an offer from a company to take the whole site for £1.6m,” said Coryn Warren. “We got an email (from Dunbar) saying there’d be no debt forgiveness on (an amount of) £60,000.
“The £60,000 shortfall we could have worked out. They weren’t interested; they were after the site. They wanted that site.”
Customers like the Warrens claim Dunbar was too quick to launch bankruptcy proceedings against its clients.
And a former company insider said the bank’s policy was to get its money back as quickly as possible after Zurich decided to close Dunbar and realise its assets.
“It was a classic example of panic,” the man, whose identity has been protected, said. “There was a very clear strategy; they got their money back as quickly as possible.”
Dunbar said it would be “inappropriate” to comment on individual cases but each bankruptcy was determined by a court following a “fair and independent” hearing.
The bank also said it had reached amicable settlements with borrowers.
Another complaint made against the bank is its revaluing of property.
Dunbar would lend developers a maximum percentage of a development’s value, for example 65%.
After the crash it revalued the developments; in most cases the value went down. That made the loan a much bigger share of the development’s total value.
Dunbar would then demand customers pay cash to repay part of the loans and get back to 65%.
Jerry Holmes, once a multi-millionaire property developer, borrowed £300,000 from Dunbar to develop a block of properties in the centre of Leeds using those buildings as security for the loan.
“Then the crash happened, Dunbar called in all their loans including ours,” he said. “Eventually they ended up with me in court and they said the site was worth £50,000.
“I was in a state of disbelief. I assumed because the property is in three sections they’d inadvertently valued just one section or one area of it and not the whole site. Anybody would know the whole site was worth more than £50,000. They repossessed the property from me, put it on the market themselves and sold it.”
Dunbar eventually sold the site for more than £600,000. Dunbar said its valuations were carried out by “independent third party valuers who are required to comply with mandatory rules governing asset valuations”.
The practice of re-evaluating property is common in the banking industry, said Ms Loveday, and so is criticism.
“Across all of the banks we see ongoing criticism of the valuations that have been used and the way they are being used to, what we would say, engineer a default,” she said.