Clydesdale Bank and SMEs

Debate between Angela Crawley and John Glen

Tuesday 19th March 2019 Commons Chamber

[Angela Crawley (Lanark and Hamilton East) (SNP)]

(Urgent Question): To ask the Economic Secretary to the Treasury if he will make a statement on Clydesdale Bank’s treatment of small and medium-sized enterprises.

[The Economic Secretary to the Treasury (John Glen)]

The Government are committed to ensuring a strong, diverse and dynamic economy, where small businesses can access the credit they require in order to prosper and grow. As such, we expect the highest standards of behaviour across the financial sector, which is why a number of necessary changes have been introduced to restore public trust in financial services, such as the senior managers and certification regime. Although it would be inappropriate for me to intervene in individual cases, particularly when they are subject to ongoing legal proceedings, we must always remember the human element to each case. That is why the Government have been consistently clear that, where there has been inappropriate treatment of SMEs by their bank, it is vital that those businesses can resolve their disputes and obtain fair redress.

At the Budget last autumn, the Government set out their support for the Financial Conduct Authority’s plans to expand eligibility to complain to the Financial Ombudsman Service to small businesses and micro- enterprises. This will ensure that, from 1 April 2019, well over 99% of all UK businesses will have access to fast, free and fair dispute resolution. The Government have also been clear that banks need to work hard to restore businesses’ trust in their institutions, and have welcomed the banking industry’s commitment to establish two independent voluntary ombudsman schemes to resolve SME disputes.

I am extremely pleased that last week my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) agreed to sit on the steering group responsible for implementing these schemes, alongside Nikki Turner from the SME Alliance. That follows several months of intense engagement with the all-party parliamentary group on fair business banking. Although eligibility for the scheme to address historical complaints will need to be determined on a case-by-case basis, I encourage all SMEs that believe that they are eligible to apply once the scheme is up and running in September.

I am pleased that the sale of loan portfolios to third parties is now covered by the standards of lending practice—overseen by the Lending Standards Board—to which Clydesdale is a signatory. That means that it is now committed to ensuring that third parties that buy loans have demonstrated that customers will be treated fairly, and to allowing customers to complain to the original lender if there is a dispute that cannot be resolved. I can also confirm that Andrew Bailey of the FCA has spoken to Clydesdale about the case in question.

The Government are not complacent about this serious matter. We will monitor the implementation of these new or expanded dispute resolution schemes, and we will continue to remind banks of the importance of restoring SMEs’ trust in them.

[Angela Crawley]

I asked for this statement on Clydesdale Bank’s treatment of SMEs in the light of my constituent John Guidi’s hunger strike in protest at his treatment by Clydesdale Bank and Cerberus Capital Management. I am aware that aspects of Mr Guidi’s case are sub judice, so I do not intend to refer to the specifics in any way that would prejudice the case.

In 1998, John Guidi built a business in the west of Scotland with a portfolio of almost 150 properties. Clydesdale Bank backed that business from the very beginning. Mr Guidi has told me that he was treated by bank chiefs as “a model customer”, and in only 15 years he built a property business worth £16 million. He never missed a payment, was in regular communication with bank bosses and appeared to have a great relationship with the organisation.

My constituent informed me that Clydesdale Bank changed the structure of his loans in 2002, introducing him to the tailored business loan. In 2014, Clydesdale Bank sold its tailored business loans to Cerberus Capital Management—an American private equity business. Mr Guidi says that this organisation aggressively pursued the debt and subsequently put his company into receivership a few months after purchase. As a result of my constituent signing a guarantee, he has personally been made bankrupt, and the company is pursuing his family home. He only has a few weeks before he is evicted and has taken the decision to start a hunger strike in protest.

This tragic case brings attention to the vulnerability of UK businesses to abusive treatment by lenders and vulture funds, and the inadequacy of current regulation in preventing it. Sadly, John is not alone. There are hundreds of people across the UK whose tailored business loans were sold by Clydesdale Bank to Cerberus Capital Management. Since 2010, Cerberus has acquired more than 1.2 million distressed or non-performing loans, worth more than $80 billion. Simply put, Cerberus is the world’s largest debt collector.

As we all know, so-called distressed loans are often anything but. Since the banking crisis of 2008, we have seen a sorry catalogue of thousands of instances in which banks have forced legitimate borrowers into distress through no fault of their own, and because loans to SMEs are not regulated properly, the customers have little or no redress. John now finds himself in that category. All he wants is a fair say before he loses his family home. He has requested that his case go to an independent arbitrator for a review.

Will the Minister join me in calling on both Clydesdale Bank and Cerberus to engage with my constituent urgently, and will he meet John to discuss how the lack of regulation in the banking industry has destroyed his business? Finally, is now not the time to pursue an independent financial tribunal to ensure that my constituent can receive adequate remedy from the dispute resolution of his case?

[John Glen]

I thank the hon. Lady for her points, and I will try to address them all. The decision to develop the dispute resolution service was taken carefully, after a lot of engagement with the industry. I am obviously aware of the press coverage around the case and of the extremely difficult circumstances faced by her constituent. I understand that enforcement action is currently on hold as legal proceedings have been brought against Clydesdale and Cerberus. I also understand that Clydesdale and Cerberus have offered to meet Mr Guidi.

The hon. Lady raises a number of points about a preferred alternative mechanism for resolving such situations. It is common across all jurisdictions for banks to sell off parts of their portfolio of debt at times. The question becomes what the appropriate mechanisms and safeguards are in those cases. The sale of debts to third parties is covered under the standards of lending practice, to which Clydesdale is a signatory. That means that it is committed to ensuring that third parties that buy loans have demonstrated that customers will be treated fairly, and to allowing customers to complain to the original lender if there is a dispute between the business and the third party that cannot be resolved.

I am very happy to meet the hon. Lady to go through the full extent of her outstanding concerns on the matter. I take the issue and this case very seriously.

Closure of Santander Banks

Debate between Angela Crawley and John Glen

Thursday 7th February 2019 Commons Chamber

[John Glen]

I will talk in a few minutes about the ways in which we have intervened to try to find solutions to the circumstances in which the hon. Lady’s constituents find themselves. As I am sure those Members who have spoken are aware, the UK financial services sector is a whole-UK phenomenon, and Edinburgh in particular is important to financial services. The Government want to protect the sector, which is why we do not make the direct intervention that some may be looking for.

The Government firmly believe that the impact of branch closures should be understood, considered and mitigated, where possible, so that all customers, wherever they live, can continue to access over-the-counter banking services. The first step is to ensure that customers feel informed and supported when a branch closes, which is why the Government support the industry’s access to banking standard. All the major high street banks have signed up to the standard, which commits banks to a number of outcomes when a branch closes. First, they commit to give at least three months’ notice of a closure and explain their decision clearly; secondly, they commit to consider what services can still be provided locally, and communicate alternative ways to bank clearly to customers; and thirdly, they commit to ensure that support is available for customers who need extra help to bank online or, where that is not possible, to access services at the local post office. The standard is not just a checklist that banks need to go through; it is about being considerate of customers’ concerns when a branch closes.

In the case of Santander, I am pleased to inform the House that it took a number of steps when announcing the restructure of its branch network. Not only did it proactively contact all customers, as per the requirements of the standard, but it set up a dedicated phone line for customer queries about the changes for the duration of the closure programme. Furthermore, its branch teams will be proactively contacting known vulnerable customers to ensure that they are properly supported and advised on how to continue to bank locally. This includes all customers over the age of 75 who have visited the branch in the past 12 months, as well as those customers who have sight impairments or mobility issues, power of attorney, or are known by the team to be vulnerable. Where needed, this support can include: walking customers to the post office to introduce them to the post office team and demonstrate how they can carry out their banking; introducing them to staff in a neighbouring Santander branch; or helping customers to switch their account to another nearby provider. The teams will also take the time to talk to vulnerable customers about how they bank, changing the frequency of their statements and ordering cash cards, and to demonstrate how to use ATMs and contactless cards.

I acknowledge the point made by the hon. Member for Central Ayrshire (Dr Whitford). My father died a couple of years ago and I have been trying to migrate my mother to do more of this stuff online, otherwise the burden falls to me. I recognise that there are limits to that process but, in this case, a great deal of sensitivity has been shown to help customers to adapt to the new environment.

[Angela Crawley]

I appreciate what the Minister has said about the measures that Santander has taken. It is very noble of the bank to offer to walk someone to a post office—or to take them on the train to Glasgow in my case—but I am not hearing from him what the Government are doing to regulate financial services when they continually close branches across the UK. That is what I want to hear from the Minister.

[John Glen]

I promise the hon. Lady that I will come on to talk about that. It is about the relationship between the banks and the post office in the instance where it is the last bank that is closing. I am not here to defend the commercial decisions of banks, but I do think that the measures taken in this case look quite comprehensive with respect to dealing with vulnerable customers.