CYBG, which recently acquired Virgin Money with plans to ramp up small business lending, is facing a heightened legal challenge from small businesses accusing the institution of forcing some small firms into insolvency.
Reports in Sky News on Tuesday (Oct. 30) said that RGL Management is forming a joint venture with allSquare Finance to combine their legal efforts against CYBG as they plan to file an official suit. The group announced that its membership is nearing 500, with hundreds more expected to join.
"Each day, more and more businesses are rushing to join the action before it is brought to court," RGL said in a statement. "The claim is expected to bring hundreds of millions of pounds in compensation."
The legal complaints relate to allegations against Clydesdale and Yorkshire, owned by CYBG, which accuse the FI of failing to adequately disclose interest rate swaps linked to their Tailored Business Loans. The complaint alleges mistreatment of small business borrowers between 2001 and 2012. RGL Management has been organizing a group of claimants since last year. Bringing allSquare Finance into the effort will add the company's expertise in legal action against banks, RGL said.
Separate reports in The National noted that RGL first announced last year that it was looking to raise funds from Augusta Ventures to initiate legal action against both Clydesdale and NAB in relation to tailored business loans.
"By joining with RGL's action, we are extremely pleased to be able to offer a cost-effective route to compensation for not only our clients, but also for the many other affected businesses up and down the U.K.," allSquare Managing Director Daniel Hall said in another statement. "The combined claim will be significant, for RGL's expertise, legal team and funding will ensure that we have the best possible chances of success."
In response, CYBG told The National that any clients with concerns should contact the bank directly.
"The bank has dedicated substantial efforts in recent years to working through this historic conduct matter, engaging openly and transparently with customers as part of a wide-ranging remediation program," a CYBG spokesperson said. "We have made significant progress in resolving the vast majority of cases. The allegations contained within the letter are not accepted by the bank."
CYBG completed its acquisition of Virgin Money earlier this year in what they said created the nation's largest challenger bank. Together, the institutions pointed to small business financial services as a key focus of their combined growth trajectory.
"The Virgin Money brand has potential in the [SMB] market, and testing with existing Clydesdale and Yorkshire Bank customers is underway to evaluate the Virgin Money brand affinity with [SMB] customers and the appropriate timescale for any [SMB] rebranding exercise," CYBG said in October.