Banking Misconduct and the FCA

Clive Efford Excerpts

Thursday 10th May 2018 Commons Chamber

[Clive Efford (Eltham) (Lab)]

I congratulate my hon. Friend the Member for East Lothian (Martin Whitfield) on securing this debate.

My constituents were private tenants who had lived above a shop for many years and brought up their children. In 2007, they decided to buy the property when it came up for sale at auction. They were customers of NatWest, which agreed that they could have a mortgage for 10 years. They bought the property on 6 July 2007, and were contacted by the bank to pay valuation fees. The valuation should have informed the bank that my constituents needed a regulated mortgage, since they occupied more than 40% of the property. On 9 July, NatWest informed my constituents that they needed to open a joint bank account, take out a one-year business loan and pay £4,000 in fees for the privilege. That was due to the fact that the premises included a shop. One year later they were allowed to take out a two-year loan, again with more arrangement fees. They thought that was normal, because they did not understand that they should have had a regulated mortgage contract.

This debate is about small and medium-sized enterprises, but my constituents were forced to become an SME, and they were treated appallingly by NatWest. They did not understand the system, and the bank took full advantage of that. They continued to pay the loan without any defaults. After the two-year loan period expired, the bank attempted to contact them, but that was cancelled due to the snow. They finally met up five months after the two-year loan had expired in 2011. In May 2011, the bank told my constituents that they were in default. That resulted in a complaint to the bank, which found in favour of my constituents. However, the bank continued to pursue them, asking them to sell the property.

My constituents made a further complaint, and on 19 January 2012 they received a response from the bank’s complaints department, which said that it was nothing to do with anything they had done, but that:

“The bank needs to rebalance its exposure in the property area. We have twice as much property funding as any of our competitors and this needs to be managed down to more normal levels.”

It was nothing to do with anything my constituents had done wrong; it was what the bank had done wrong, yet my constituents were forced to pay for it. While that was going on, the bank tried to close one of my constituents’ bank accounts, and from then on they were harried into selling the property. It was put on the market for £700,000, but because they were under pressure, they finally had to sell it for £585,000. They were never given the opportunity to live in that property and plan ahead with any confidence.

My constituents finally went to the Financial Ombudsman and requested a disclosure of documents. They discovered that they were being dealt with by none other than the Royal Bank of Scotland Global Restructuring Group, despite having taken out the original loan with NatWest. GRG convinced the ombudsman not to investigate the case and to leave it to the GRG disputes resolution process. When my constituents asked how the involvement of GRG came about, they were told that it was due to the involvement of a specialist relationship manager. GRG claims that the account was never transferred to it and states that the SRM consulted GRG during the relevant period of 2008 to 2013. Therefore, GRG did not recognise my constituents, and they were not part of the review process. My constituents were never informed of any of this; it came to light because they complained and asked for documents to be disclosed by the ombudsman. GRG also convinced the ombudsman not to look at any documents going back further than 2013.

NatWest is part of the RBS group, but it operates under a separate licence. How is it possible for two separate banking organisations to share customers’ information in this way? Is that a matter of concern to the FCA? Are NatWest and RBS GRG at fault for not keeping my constituents informed? The bank made the initial error when it forced my constituents to take a loan for one year, then two years, then no years—it simply failed to renew it—and then foreclosed on my constituents because it was overexposed in the property market. My constituents approached the FCA, but they do not know where their case now is. The FCA has to hold an inquiry into this matter. We have to get to the bottom of it on behalf of people who are just being bullied by the banks.

--- Later in debate ---

[John Glen]

I acknowledge the outstanding concerns of many people across the United Kingdom, and that is why I welcome the FCA’s consultation. It is my belief that widening SME access to the FOS is the right thing to do.

[Clive Efford]

My constituents became involved in this not because they had an SME, but because they were trying to get a mortgage and were forced into this process. The mistake was made with the first loan that was given to them, but the ombudsman will not recognise that and look into it. What we need is more pressure on the ombudsman to listen to the consumer and not the banks.

[John Glen]

I listened very carefully to the case the hon. Gentleman outlined, and I recognise the challenges that the FOS has to face up to. That is why I welcome the FCA’s investigations and the FOS’s own investigation following the “Dispatches” programme.

It is important that the landscape for dispute resolution for SMEs does not discourage or inhibit the ability of banks and small businesses to resolve disputes between themselves in a satisfactory way, where possible. I therefore welcome the reviews being undertaken in this area by the APPG on fair business banking and finance—ably led by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) and the hon. Member for East Lothian—and by UK Finance, as well as the Treasury Committee’s ongoing interest in this area. When the findings of these reviews are published, we will consider them carefully, along with the outcome of the FCA’s current consultation.

In the interests of time, I will briefly conclude by summarising the Government’s position. It is right that we wait for the conclusion on GRG of the FCA’s investigation of the matters arising from its skilled persons report before determining what further actions need to be taken, and I reserve judgment on what they could be.

On dispute resolution more widely, we must acknowledge the existing avenues, including the work that is going on in terms of reviewing and enhancing the Financial Ombudsman Service’s provision. The FCA is progressing its work looking at the relationship between SMEs and financial services providers, and the APPG and UK Finance are undertaking their reviews as well. In the light of all the work going on, and the imminent conclusion of it, it is important that I consider that before we take alternative routes.

Once again, I thank all Members on both sides of the House who have raised very important issues on behalf of their constituents. I remain engaged to find a solution—a solution that works for all of them.