Not upheld: unfair demand for full repayment; contract interpretation regarding default complaint against The Royal Bank of Scotland Public Limited Company (RBS)

Decision detail

Summary

X, a limited company, complained that RBS unfairly issued a formal demand for full repayment of its CBIL after arrears arose on a separate interest-bearing feeder account, despite maintaining capital repayments. The feeder account became overdrawn in April 2025 when interest was not paid, and despite RBS providing notice and direct contact with Mr B, the arrears were not cleared. RBS issued a formal demand on 9 July 2025. The ombudsman found that interest payment is an integral part of the loan obligation and that the unpaid interest constituted a default under the agreement terms. RBS followed a fair process of communication before escalating, and the formal demand was not disproportionate. The complaint was not upheld.

The Ombudsman's reasoning

The ombudsman found that the CBIL loan agreement and RBS Base Rate Loan Terms, read together, form the complete contractual framework. The provision allowing the feeder account to become overdrawn does not mean such an overdraft can continue without limit or that the resulting liability does not need to be repaid. Interest payment is an integral part of servicing the loan, not a separate or optional obligation. The unpaid interest on the feeder account constituted an outstanding liability and an event of default under the agreement. RBS provided adequate notice and opportunity to resolve the position before issuing the formal demand, following a fair and reasonable process of communication.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website