RBS to close small firms redress scheme to new claims

* Says scheme heard from fraction of eligible customers

* Scheme has paid just $13 mln since inception Nov 2016

* To close to new claims Oct (Shenzhen: 000069.SZ - news) . 22

LONDON, July 20 (Reuters) - Royal Bank of Scotland (LSE: RBS.L - news) said on Friday a scheme to compensate small firms hurt by its turnaround unit will close to new complaints after hearing from a fraction of eligible customers and paying just 10 million pounds ($13 million) so far.

RBS announced the scheme in November 2016 and set aside 400 million pounds to compensate thousands of small businesses that say they were mistreated by RBS's Global Restructuring Group (GRG), some of whom say their firms were pushed into bankruptcy and stripped of their assets. It set no timeframe on how long the scheme would run.

From the 16,000 firms eligible, RBS said it had received just 1,230 complaints as well as a further 165 from customers outside of the scheme's scope. The rate of complaints has fallen to six per week from a peak of 35 in December 2016, it said.

Chairman Howard Davies said with the number of complaints continuing to decline, it was the "appropriate" time to give customers notice of its closure.

“Throughout the GRG complaints process – which was first announced more than 18 months ago – our focus has been on putting things right for those customers who did not receive the level of service and understanding they should have done whilst in GRG," he said in a statement.

GRG handled some 12,000 troubled small firms between 2007 and 2012 alone. While the bank rejects the most serious allegations against the unit, it has accepted some wrongdoing.

The scandal still dogs the British lender's efforts to reform its reputation almost a decade on. In May, it extended the remit of the redress scheme to consider appeals for indirect losses following criticism of its handling of complaints from former customers and politicians.

RBS said it would write on Friday to all remaining eligible customers to inform them of the scheme's closure to new complaints on October 22. After that date, customers' only recourse will be the bank's usual complaints procedure.

Of the complaints it has received, RBS said it had concluded 803 cases, upholding in full or in part just under half of that figure. A retired judge that oversees the scheme, William Blackburne, has received 169 appeals against the bank's compensation decisions. Of the 55 he has concluded, 15 were upheld.

The bank added that Blackburne has received four appeals from customers for indirect - or "consequential" - losses, and that if successful these were likely to, on average, result in higher payments to customers than those for direct loss.

($1 = 0.7670 pounds) (Reporting by Emma Rumney; editing by Emelia Sithole-Matarise)