THE ROYAL Bank of Scotland has promised to overhaul the way it deals with struggling small firms after a review criticised some of its practices.
The Edinburgh-based bank made the move as law firm Clifford Chance said it could find no evidence to substantiate allegations it forced small firms to close so it could make a profit.
But RBS said it would make changes to the way it handles small businesses in trouble, including winding down West Register, its property unit that has bought assets from distressed business clients, because of "a damaging perception that the bank had a conflict of interest". The £900 million West Register real estate portfolio includes property purchased from 166 of the bank's small business customers.
In November, the bank asked Clifford Chance to carry out the £1.5m review, following claims made in a report by a former government adviser, Lawrence Tomlinson, that it pushed struggling small businesses into its "turnaround" Global Restructuring Group (GRG) unit so it could charge higher fees and take control of their assets.
While the law firm concluded there was no evidence to support the allegations, it criticised some aspects of the state-backed bank's practices.
Clifford Chance said it "found it difficult to understand how the bank calculated the fees which it proposed to customers in any particular case" and made a recommendation to the bank to improve fee transparency.
In response, RBS, which still faces a probe over the issues by the Financial Conduct Authority, said it would waive the extra 2% "default interest" levied on small firms that default on their loans for 90 days and would give customers 30 days' notice of any changes in fees.
Clifford Chance also found that in some cases RBS "sought to encourage or incentivise a specific course of action by the customer through its pricing [of fees] such as an exit or sale of assets to reduce the customer's debt."
Alison Loveday, managing partner at law firm Berg, which has received more than 150 complaints about GRG, said the report was flawed, pointing out that Clifford Chance did not review the files of the same customers it interviewed.
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