RBS has settled a legal case with a family who claimed an interest-rate swap ruined their business, ending a four-year battle. Mike and Diane Hockin, who owned a property business in Plymouth, accepted an undisclosed sum on Wednesday, the third day of a scheduled five-week trial. The bank did not admit liability.
It is the latest in a string of court actions and compensation claims involving the bank and small businesses that say they were improperly sold products that saddled them with high costs.
RBS sold the Hockins’ business, London and Westcountry Estates, a complex interest-rate hedging product with a 10-year term alongside a three year loan in 2008.
It was designed to protect against interest-rate rises. When interest rates fell during the financial crisis, the company incurred £600,000 of extra repayments a year and faced a £11m exit fee.
The increased payments put financial pressure on the business, and it was transferred to GRG, the now-disbanded special unit for distressed customers.
MPs have attacked GRG for saddling businesses with extra costs. The bank has apologised for some of its actions and set up a compensation scheme.
The loan and security were subsequently sold on to Isobel Assetco Limited, which was 75 per cent owned by RBS. Isobel then demanded the full repayment of the loans and, when that could not be done, put the business into administration.
Administrators EY then took over the legal claim and refused to pursue it. In March 2014 a judge ordered EY to let the Hockins do so.
Alison Loveday, chief executive of Berg, the couple’s law firm, said: “The Hockins lost a successful family business that they had built up over 30 years, for which they hold the bank fully responsible. They knew they could never get the business back, as it had effectively been dismantled and sold off.
“They were determined, however, that they should be compensated for their loss. In addition to the financial loss, the battle against the bank has had a huge impact on their personal lives with the litigation effectively becoming a full time job. To bring their case to court was a huge achievement for them.”
RBS said: “We are pleased to have resolved this matter, with no admission of liability.” It pointed out that it had never lost a swaps claim in court.