George accuses bank of failing St Ives business

Posted on: 27th November 2013

Local MP, Andrew George, has criticised a major bank for the way in which it has allegedly treated a St Ives businessman selling one of his properties without consultation or a possession order from the court.

Colin Phillips, former owner of the property Coasters Tea Shop in St Ives, which is operated under a lease agreement by his wife, believes he was mis-sold a loan by Clydesdale Bank five years ago.

He entered into an interest rate swap agreement (IRSA) despite being under the impression that it was a fixed rate loan. As a result, he says he incurred ‘unreasonable’ charges and ultimately lost his property.

Mr Phillips tells me he is convinced the bank manipulated the loan agreement to asset strip him of the property similar to the allegations laid before the FCA related to the RBS.

Mr George, who highlighted his case to the Business Secretary – Rt. Hon Vince Cable MP – earlier this year, said he was appalled at the way in which Mr Phillips had been treated.

He said: “While many small businesses work hard to maintain and grow their business some High Street Banks behave like parasites. If they can successfully mis-sell a small business a complex product they will then latch onto their host and, if necessary, suck them dry; just as Clydesdale has apparently done with Mr and Mrs Phillips. And they’re certainly not the only ones. There are many other cases I can’t tell you about, but which show that there’s a pattern going on here and it isn’t nice, or fair.

“That’s why I’m pleased that Business Secretary, Dr Vince Cable MP has referred the RBS cases which allegedly show that Banks are taking advantage of the vulnerable position of small businesses.

“Mr Phillips tells me that he never missed a single repayment to the bank and returned to them more than £250,000 capital to reduce his borrowing when Clydesdale Bank then, he tells me, added a further £102,000 in break cost fees to his account, still never missing a payment including repayments on the break cost in 2012, the bank cancelled his overdraft facility and demanded the immediate repayment of the loan offering no explanation as to why. This despite the fact the property had equity, the business was in profit and had no cash flow problems, so could easily maintain payment to his overdraft facility.

“Clydesdale Bank has subsequently sold the property from under him, without a due legal process or informing him of the sale until more than three weeks after completion and is now demanding a further payment of £195,000 in interests and costs.

“IRSA loans are very complex and seem to be seriously inappropriate for small businesses. Clydesdale Bank has apparently catastrophically failed my constituent and his family and they should be held to account.”

The Financial Conduct Authority has been reviewing the issue of interest rate swap agreements since 2012. But it consistently claims the type of loan Mr Phillips had from Clydesdale Bank, which had an embedded Interest Rate Swap Agreement, is excluded from this review as it is currently an unregulated loan.

The Office of Fair Trading (OFT) and the Financial Ombudsman Service (FOS) say that because the loan is unregulated there is nothing they can do. Mr Phillips contends that the Clydesdale Bank designed the Loan Product a “Tailored Business Loan” so that it fell outside of all current regulations and is a unique and clever scam perpetrated by the bank which puts the customer in a no win situation and the bank in a position they cannot possible lose and make significant profits including taking the customers assets if and when they can.

Earlier this year, a report found that over 90% of small firms could have been mis-sold IRSAs, with Business Secretary Vince Cable claiming that as many as 100,000 small firms could have been affected.

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