'It just breaks you' - Row with RBS ruined Norfolk firm and family still can't look to future
PUBLISHED: 07:57 26 March 2018 | UPDATED: 11:30 26 March 2018
ARCHANT EASTERN DAILY PRESS (01603) 772434
He turned an old farm into a booming delivery firm. Then five years ago he lost it all in a battle with his bank. The dispute still stops Paul and Jane Clark from moving on today.
On March 28 2008 Paul Clark says he made the worst mistake of his life – he switched banks.
Ten years later that decision is still hanging over him.
Mr Clark’s Stratton Strawless haulage firm, Clarks Direct, went into liquidation in 2013 owing £600,000.
It went bust, like thousands of other firms, after being put into a controversial part of the Royal Bank of Scotland (RBS) called the Global Restructuring Group (GRG).
The firm was charged tens of thousands of pounds in fees and extra interest in GRG and given a product it did not need, which then cost Mr Clark £200,000 to get rid of.
But five years after the business went under, the 54-year old and his wife Jane are still living in limbo.
The warehouses they built for the haulage business next to their house, which could be earning £30,000 a month in rent, have stood empty since 2013 and they cannot sell the home.
“It is a horrible limbo,” Mr Clark said. “We can’t move or downsize because RBS have a charge on our house.” That means the bank secured its loan to Clarks Direct against the value of the Clark’s house.
“We want to get on with our lives. We have offered to rent the warehouses from the bank so we could then pay the mortgage off but they ignore us.
“It is a horrible stalemate. It just breaks you,” he added.
“We are sitting in a beautiful property with 17 acres but no income and a wood burner is the only thing keeping us warm.”
There have been points over the last five years when they have had hope.
The bank paid out £400,000 compensation for mis-selling them something called an Interest Rate Hedging Product (IRHP). But they didn’t see a penny of it – it was kept by RBS to pay off their debt to the bank.
The latest cause of hope for businesses which were harmed in GRG is a report from regulator the Financial Conduct Authority (FCA).
Published in February, it confirmed there was “systematic” mistreatment of small businesses by RBS.
But it cleared the taxpayer-owned bank of the most serious allegation of deliberately destroying firms, like Clarks Direct, so it could seize their assets on the cheap.
“The report has to be acted on,” Mr Clark said. “We can not look to the future at the moment.”
Mr Clark grew his storage and haulage company on the old pig farm on Shortthorn Road from nothing in 2003 to a company with a £2m turnover.
They employed 40 people and were the first haulier to work with Amazon in the UK, transporting Harry Potter books for Bertrams.
Then in 2008, his accountant suggested changing banks from HSBC to NatWest, which is owned by RBS, to get a better rate of interest on their bank loan.
To transfer across, the bank wanted him to sign up to something called an interest rate hedging product (IRHP).
It would protect his company from extra costs if interest rates went up. But during the recession, interest rates were falling and he told the bank he did not want it.
The day he switched banks, however, Mr Clark said NatWest would not release the funds until he signed up to the IRHP. It was a Thursday and he needed the money to pay his staff before the weekend. The bank also told him it was a free product.
He agreed. “From there on our life crumbled,” he said.
After switching banks, Mr Clark says he noticed he was being charged around £5,000 extra a month on his loan repayments.
When he asked what it was for, staff at RBS’ office on Broadland Business Park said it was the IRHP – which he had been told was free.
Ten weeks later RBS put Clarks Direct into their turnaround unit for struggling businesses, GRG.
But his firm was not in distress. It was making a profit of around £400,000 a year, and had a turnover of £2m. Its assets of £3m were more than enough to secure borrowings of £1.1m.
“RBS told us they were nervous because Woolworths, which owned one of our customers Bertrams, went bust,” Mr Clark recalled. “But we were busier through the recession. Companies were subcontracting to us rather than investing in their own storage and vehicles.”
Like 90pc of all businesses put into GRG, Clarks Direct never made it out again.
The firm was charged thousands of pounds in fees, including “monitoring fees”, “overdraft fees” and higher interest rates.
“They were draining cash from us but we were a strong business,” Mr Clark said.
In 2012 alone they paid £60,000 in bank charges, he said.
They never missed a loan payment but the amount of repayments would double some months and be cut others.
But the news kept getting worse.
RBS had a charge on their house to secure the £1.1m loan. But Mr Clark believed the bank only had a charge against the warehouses on his farm for the borrowings and not the house.
The Clarks had initially decided to borrow a mortgage for the house and get a separate loan for the businesses using the warehouses as security on that loan. But he understood RBS would put the mortgage and business loan together and use the warehouses as the charge. However the charge was registered on the house as well, even though there was no separate mortgage for the house.
His solicitors are now looking at how the charge was placed on the house.
To add to his woes, to get out of the IRHP he would eventually have to pay the bank more than £200,000.
IRHPs have since been exposed as being mis-sold by banks. The FCA ordered a review into them in 2013 and banks have since paid out £2.2 billion in compensation.
But that was too late for the Clarks.
The taxman, meanwhile, was not being paid and in 2010 with the debt to HMRC mounting the company was put into a Company Voluntary Arrangement (CVA) where an agreement is made with the creditors to keep the company trading.
“We just kept on going.” Mr Clark said. But in 2012 he had a nervous breakdown.
And that year two GRG staff visited the farm.
“They told us you can not afford your farm any more. The company finally went into administration in 2013 owing £600,000. The vast majority of that was to HMRC.
Since then the Clarks have been fighting for redress.
They put in a court claim for £4m in losses but can no longer afford the fees for the court fight.
“There was no restructuring in GRG,” Mr Clark said. “We felt completely helpless.”
•RBS: Culture has changed
RBS did not respond to our requests for comment about Mr Clark.
The bank has defended itself for years against allegations it mistreated small businesses which it placed into its turnaround division called GRG.
But after the publication of a report by regulators in February showing mistreatment of firms in GRG, an RBS spokesman said it was “deeply sorry” some customers did not receive the experience they should have done.
“We know that the bank got a lot wrong in how it treated some customers in GRG during the financial crisis,” they said.
“That is why we put in place two steps – a complaints process overseen by retired High Court Judge, Sir William Blackburne, and an automatic refund of complex fees – to put things right.”
RBS said its culture and the way it operated today were very different from 2013 and it had accepted the recommendations of the FCA report.
•Scandal of IRHP
The Clark’s case has been looked at by regulatory expert Steve Middleton, who advises a whistleblowing service called Bank Confidential.
He said Interest Rate Hedging Products (IRHPs), such as the one the Clarks had with RBS, were a way of banks adding to their balance sheet.
Mr Middleton said profits from IRHPs relied on the customers’ assets for security and therefore the profits the Bank expected to make from them were covered by a substantial amount of credit that was not always declared to the customer.
In Mr Clark’s case he did not realise he would have to pay around £200,000 to get out of the IRHP, which cost him thousands of pounds a month in extra interest payments when interest rates went down.
Mr Middleton said many business customers who took out IRHPs ended up in the bank’s turnaround division, GRG, because credit facilities they knew nothing about created breaches in their lending.