BUSINESSES across North Yorkshire who took advantage of a Government-backed lending scheme are being urged to take legal advice after a high street bank admitted it mis-sold loans to some companies.

The Royal Bank of Scotland (RBS) is conducting a ‘loan by loan’ review of its use of the Enterprise Finance Guarantee after an internal investigation revealed serious failings in the way it administered the scheme.

Darren Morgan, a partner in dispute resolution at York law firm Langleys Solicitors, has experience of the EFG scheme after acting for a bricklaying company.

Mr Morgan said: "The company sought my advice and my opinion was that the bank had misrepresented how the scheme worked and that the MD remained liable for the entire outstanding loan.

"We submitted a complaint to the RBS and made a claim for the repayment of the arrangement fees and monthly fee.

"The admission by the RBS will have set alarm bells ringing among other businesses who have taken out an EFG backed loan and we would urge them to take legal advice about whether there is a claim for compensation."

The company involved has since gone into liquidation and was pursuing the bank for compensation through its liquidators. The RBS voluntarily released the MD from his personal guarantee in respect of the loan.

The EFG scheme has facilitated more than £2.3 billion in funds to small businesses since its launch in 2009.