National Westminster Bank confirmed yesterday that it is looking into claims from traders in Long Sutton, Lincolnshire, against David Marshall, a former branch manager.
Mr Marshall, who took early retirement from the bank, said a vendetta was behind the allegations, which he described as "smear stories".
Former clients are seeking compensation from NatWest. Their cause has been taken up by the industry watchdog, the Independent Banking Advisory Service.
A spokeswoman, Brenda Weatherill, said: "We have been aware of problems in Long Sutton for a couple of years, but now we've been absolutely deluged by complaints."
One former client,Roger Hole, a butcher, suffered a near breakdown after his 35-year-old family business folded. His wife, Pauline, said: "We put our problems totally down to David Marshall's bad advice.
"We went to him for help after a fire gutted my husband's shop - and ended up paying interest of pounds 20 a day on an overdraft. Our debts spiralled by pounds 6,000 within a year, but he used to just encourage us to borrow more . . . as a result we're virtually penniless and the house is being repossessed - it's a life-time's work down the drain."
Bruce and Margaret Rayner moved to Long Sutton to set up a guest house in a detached Victorian farmhouse set in its own grounds. But after they opened an account with Mr Marshall's branch in 1987 they claim their dream turned into a living nightmare.
Mrs Rayner said: "We wanted a pounds 20,000 business loan, but Mr Marshall persuaded us to take out a pounds 10,000 loan and pounds 10,000 overdraft. We had never had our own business before, so we obviously trusted him.
"It was just the time when interest rates were going up and up. We were very worried, but when we went to see Mr Marshall all he did was complain about his own problems. Then he cancelled our loan altogether and started pressurising us to sell the house. He . . .charged hundreds of pounds for every new facility he set up."
The Rayners had to sell their home for pounds 13,000 less than they paid for it and are now living in council rented accommodation.
Mr Marshall, who is retired and living in nearby Spalding, said: "I was a bank manager for 40 years and worked at the Long Sutton branch for 12 years ... these people got into trouble because of their own lack of business sense at a difficult time, and it looks like they're now trying to jump on a bandwagon and make me a scapegoat."
NatWest said that it would look into the allegations concerning the Long Sutton branch "as a matter of importance". A spokesman added: "NatWest treats any complaints from customers seriously."Reuse content