From The Sunday Times

December 7, 2008

Couple stung by 100,000 secret loan

RBS turned overdrafts into high-rate loans without telling customers

Georgia Warren, Banking and Jon Ungoed-Thomas

IN EARLY spring, a West Country businessman, Duncan Birch, and his wife Debbie feared they might be
among the first victims of the credit crunch. A letter to the couple from their bank claimed they owed more
than 100,000.

But what was particularly galling was that the large sum being claimed related to a debt of less than
25,000 in the 1990s which they believed had been paid off. They were baffled and concerned at the size
of the demand.

Two years earlier, RBS had been asking for 8,500 to settle their case, which they had been unable to
afford. How on earth had this risen to more than 100,000?

According to internal banking documents obtained by the Birches, from Torrington, Devon, they claim to
have found evidence that new accounts and loans were created in their name. At one stage, 80% was
being charged on one account.

It appears this weekend that the Birches stumbled upon a highly questionable practice in the debt
collection branch of RBS in Telford, Shropshire, whereby new accounts and loans were systematically
created without customers permission. In some cases, loan documents were even drawn up for the
accounts.

According to RBS, these accounts were an internal book-keeping device and the debts were never meant
to be collected or even divulged to the customers. It seems a strange accounting practice, and last week
the bank was unable to explain its exact purpose. This is simply an administrative practice that has
absolutely no impact on the [actual] debt or the liabilities, said an RBS spokesman. John Healey, a former
Treasury minister and now a local government minister, is to meet Stephen Hester, the new RBS chief
executive, to establish the number of new loanaccounts created without customer consent and the
number of customers who may have been wrongly pursued. There are clearly questions for the bank to
answer, he said.

The Birches insist they are being pursued for the debts from these accounts. They have had legal
charges put on their home by RBS at Barnstaple county court. They say it means when the home is sold,
they will be liable to pay RBS about 70,000.
They claim we owe this ridiculous amount and its almost ruined our lives, said Birch, 46, last week.
They have certainly pursued us for money in these accounts which were created without our consent.
In the 1990s, the Birches started a company which created printed T-shirts. The business was initially
successful, but foundered when one of their main clients went bust, forcing them to close their business
with about 24,000 of debts at the bank.
They agreed to pay back RBS at 300 a month, on the basis that interest and charges would be frozen.
They paid back 7,500 but were then unable to make further payments.

After a county court judgment against them in 1999, they again started paying back 300 a month. By
2006, according to their own estimates, they had paid back 33,000.

At this point, RBS offered to settle the case for 8,500, but the couple could not afford the one-off
payment.

Then in early 2008, the bank claimed the Birches owed more than 100,000 and put the legal charges on
their home.

Armed with advice from online internet forums, the Birches made a data protection request to the bank.
The documents they received detailed a fascinating trail showing the numbers on their accounts had been
changed and three new capital and interest loans created without their consent.

While the couple thought they were paying back debts on which no interest was due, high rates were in
fact being levied.

A bank statement for Debbie Birchs account, which has been seen by The Sunday Times, shows that
interest of 15,883 was charged in just one quarter in 2001.

According to another document, the Birches were being charged 80% interest when they were trying to
pay back their debts. The bank claims the error was rectified.

There are other victims. Paul Walton, 41, from Rotherham, South Yorkshire, discovered that RBS had
created different accounts in his name without his consent. He also demanded bank documents under
data protection laws after being told in 2006 he owed 16,000 on a loan taken out eight years earlier for
less than 9,800.

The documents showed his accounts had been changed and a previous overdraft with the bank converted
to a flexible capital and interest loan. He was also sent two loan agreements that had been drawn up
without his consent.

According to a letter sent to Waltons MP, Healey, in November last year, a senior banking official said: I
confirm that Mr Walton has never signed or agreed to these loans. The loans have never existed. The
forms were inaccurate and sent in error.

RBS said the court judgment against the Birches governed the amount they owed and this is all they have
been asked to pay.
The spokesman said the bank accepted it had made errors in regards to Walton. Significant interest had
been charged on accounts in his name but this was an administrative process that had no bearing on the
sum he owed.

This weekend, the bank was unable to say how much the Birches owed or how the debts had mounted up.
We just cant see any light at the end of the tunnel, said Duncan Birch.

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