Commercial Loans

Kevin_1973

Not sure if this is the correct place for this post. I was wondering if a borrower has any rights when dealing with commercial lenders or can these guys just do what they want. I have facilities with the infamous RBS who effectively have trippled my interest rate on an office loan and two BTL loans that is now putting huge stress on cashflow.

I refused to sign the facility letter but they have a subsection in it that states that it will kick in whether signed or not. They also wanted me to sign a paragraph at the back of the facility letter accepting that the loan does not come under the remit of the Consumer Credit Act.

Can I do anything.? I think it is laughable that these guys were bailed out by taxpayers billions yet rather than assisting small business they are screwing us big time.

I have protested to relationship manager who says that they cannot budge from the new rates and fees set.

What do I do.? Thanks for reading.

ILW

Take your business to another bank.

Kevin_1973

Thanks for the reply. I cannot move as the loan to value is too high. With downturn LTV is sitting at 85% - 90%. Banks do not want anything new above 75%. Looks like I am stuck with the terms provided by RBS.

jen_a_c

Can you prove to the bank via forecasts what impact the increased interest rate will have?

Kevin_1973

I can prove it and have expressed my concerns but they have fallen on deal ears. The effect on business will become apparent over the coming months and I intend to keep a diary of each communication to and from bank as the problems unfold.

[Deleted User]

Hi Kevin,

Two questions:

1. Did the original contract specify that they could alter the interest rate at any time?
2. ...and if so, did it say that they didn't need you to consent to this if so?

Contracts can be varied by 'collateral' terms in what is known as a 'last party wins' process. If you agree the interest rate with the bank, then they can come back and say 'actually we want you to pay double', but provided you don't consent then they can't force this arrangement (as a collateral term) unless you agreed in the original contract that they have the power to vary the terms without your agreement.

Your original post suggested that they wrote to you varying the terms of your agreement and said that 'these terms take effect whether you consent to them or not', which isn't true (legally) unless they specified in the original contract that they had the power to alter the terms unilaterally.

jen_a_c

Have you breached any of the covenants stipulated in the original agreement (e.g. financial ratio tests?)

Kevin_1973

Thanks for the replies. I will need to dig out the original agreement from 2007 but "I think" they are allowed to review on an annual basis. Will need to confirm this. I have not broken any covenants yet but come December when next quarterly payment is due under new terms I may not have the full payment.

Also any ideas why do they require me to accept that the loan is not covered by Consumer Credit Act.?????

jonesMUFCforever

Is it over £25k?

Kevin_1973

The office loan and BTL loans are over £25,000. There are two overdraft facilities for £20,000 and £9,000.

jonesMUFCforever

So the O/D is covered by CCA but loan and BTL loans are not.
However o/d are repayable on demand - so be careful with your next move.