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Minister to pursue IFA's complaint against Barclays
12 August 2010
The minister for business and enterprise has taken up an IFA's complaint against Barclays after the adviser was offered 'extortionate' terms of lending. Kim Barrett, proprietor of Hertfordshire-based KS Barrett, approached Barclays Bank earlier this year for assistance to purchase an advisory firm. He said that, having banked with Barclays for more than 22 years, he was surprised when, after a few days, he was offered a minimum fixed-rate of 16.44 per cent, plus arrangement fee, for a loan of £15,000. Mr Barrett said: "The cost of my borrowing such a small amount would be excessive. When I got back up off the floor, surprised at such extortionate terms, I was told the bank had only recently agreed a deal for another client where the rate of interest is fixed at 17 per cent with a 2 per cent arrangement fee." Mr Barrett wrote to his local MP, Mark Prisk, Conservative MP for Hertford and Stortford and minister in the business, skills and enterprise department. Mr Prisk replied: "This is a classic example of the increasing evidence of unreasonable and unacceptable behaviour by different high street banks." In the letter, Mr Prisk said that he and his boss, business secretary Vince Cable MP, were "determined to increase the scrutiny of the bank's behaviour and performance and ... to pursue banks where they evidently act irresponsibly and unreasonably. "I would be only too pleased to write to Sir John Varley at Barclays." Earlier this month, banks gave unilateral pledges of support to a new taskforce that will help boost the flow of credit to small firms. However, Mr Barrett said that banks were seemingly saying one thing and doing another. The business he wanted to purchase was priced at £90,000, paid in three amounts of £40,000 immediately, and £25,000 for the next year and the same amount the third year. It would have produced an income stream of £30,000 a year. Banks have racked up more than £15bn in first-half profits, increasing their bonus payments by 25 per cent and payrolling bankers more than £10bn during the last tax year. A Barclays spokesman said: "Barclays has been open for business and offering competitive rates throughout the downturn, while supporting a record number of new businesses. KS Barrett approached the bank for a £40k loan to purchase a new client base (effectively goodwill). As such we discussed with the customer the need to provide tangible security, possibly by way of a second charge on their property. However, the customer did not want to invest any money themselves and was seeking 100 per cent unsecured funding from the bank. "Generally, we limit unsecured lending to a maximum of £25,000. As this customer already has an unsecured overdraft facility of £10,000, a quote was provided for an additional £15,000 at a rate of 16.44 per cent and £300 fee. This is at the top end of our price range and reflects the nature of the purchase, the lack of stake by the owners of the business and the risk profile of the business." Published by FTAdviser.com
