Commercial Financial Dispute Resolution Platform

Hannah Bardell Excerpts

Thursday 15th December 2016 Commons Chamber

[Callum McCaig (Aberdeen South) (SNP)]

I congratulate my hon. Friend the Member for East Lothian (George Kerevan) on his choice of tie and on securing this debate—we are wearing remarkably similar ties today, although I am not sure whether that says more about him or me.

This is a really important debate, and there are two aspects to it. First there is looking back at some of the truly appalling practices carried out on behalf of banks, and secondly there is the forward-looking aspect of making sure that these mistakes are never repeated. I do not believe that the solutions that have been put forward will do that adequately.

Banking is clearly a cornerstone of our economy. The central role that it plays has been built on trust—businesses’ trust that their bank will deal with them responsibly, but also that the Government and the financial system will protect them if that relationship, for whatever reason, breaks down. That system may work for a large conglomerate—a major employer with the ability to go toe to toe with the banks in terms of litigation, affording lawyers and so on. However, for small or medium-sized enterprises, that relationship is skewed, and they stand to lose out because they cannot meet the might of the banks.

Let me just put that into perspective. I am sure that these numbers will not come as a surprise to anyone, but small and medium-sized enterprises account for 47% of turnover and 60% of employment in the private sector. That is a huge part of our economy, and one we must all be cognisant of, and we must provide the protection it requires.

How do we go about rebuilding the trust that has been lost? We have heard that the problem stretches across the length and breadth of the country and that different banks and sectors have been affected by malpractice. Will ad hoc arrangements address the problem? I do not believe they will, because the problem is not ad hoc; in large part, it is systemic, and we do not solve systemic problems with ad hoc fixes.

There is a temptation in this place, and in all walks of life, to find the simplest solution possible. In this case, that will not cut the mustard; we need to find a proper solution, and my hon. Friend’s suggestion of a commercial financial dispute resolution platform, whether that is a tribunal or something else, is a key part of doing that.

Like other hon. Members, I have constituents who have had issues in this respect, particularly with RBS and its Global Restructuring Group. While I have been sitting in the Chamber, a constituent—I do not feel comfortable naming them, and they have asked me not to—has messaged me about this. He said that, in the dealings his lawyer has had with RBS, the bank’s lawyers have said that these things are water off a duck’s back and that a bit of bad publicity now will not change how it operates. If that is the case, it suggests that, even when we have ad hoc solutions in place, they do not solve the ad hoc problems. That adds to the compulsion on us to find that systemic solution.

[Hannah Bardell (Livingston) (SNP)]

Perhaps I could name one of my constituents, Archie Meikle, of Ashwood Homes, who has given me permission to do so. I have fought on his behalf for over six months, and we have been waiting for responses from RBS after he was forced into the GRG. Does my hon. Friend agree that the only way we can solve these problems and grow our economy is by making sure that our businesses are protected from programmes such as these, which are being pursued by the banks?

[Callum McCaig]

Unsurprisingly, I agree wholeheartedly. The importance of economic growth is tied into this. There are individual consequences to issues like these, but there are also whole-system economic problems that come from them.

Aberdeen is going through a difficult economic time as we speak, although I think we are beginning to see green shoots of recovery. However, we have not seen the problems associated with the previous financial downturn, and we may be in a beneficial situation. However, there is no systemic solution, and just because we do not have a problem now, that does not mean that there will not be problems in the future. The economic problem in Aberdeen has been particularly localised, but if it were to be repeated on a national level, the mistakes of the past could well creep back in. As the UK moves towards leaving the European Union, there is the risk of greater pressure on our financial and business systems, and the temptation may come back for banks to use the opportunity to make money on the backs of others. It is therefore incredibly pressing that we get this right.

The benefits of this proposal would be manifold. Rather than huge crises that we need to solve, we would have early intervention, and we would have parity between banks and companies, so that they could identify and solve problems early, without the need for massive recompense, as has been the case.

We have heard from many hon. Members today that it is very difficult to put a figure on the cost to business. It is even more difficult to calculate the cost to the economy of lost growth as a result of these problems. But let us come back to the human cost, which a number of Members have mentioned: the hours of grief, the hours of anguish and, in certain cases, as the hon. Member for Edinburgh West (Michelle Thomson) mentioned, the lives that have been lost. That is the problem, and we can do something about it: we can protect our businesses. We can ensure best practice, and above all, we can ensure that the mistakes of the past are never repeated.

--- Later in debate ---

[Richard Arkless]

In that sense I completely agree. The hon. Gentleman is right to point out that ADR, as a concept, exists; we are asking not for a new beast to be created, but for an ADR forum to be specifically linked to the contracts and disputes under discussion. However, I am cynical about banks’ motivation in putting the clauses in particularly risky contracts.

The right hon. Member for Delyn (Mr Hanson), who is also a colleague of mine on the Justice Committee, made a typically powerful speech in which he drilled home the perverse fact that the banks under discussion are in public ownership. Essentially, public funds are being used to push businesses against the wall and asset-strip them, which has consequences. It is very hard to accept that that is being funded by our taxpayers’ money. The right hon. Gentleman made that point extremely well.

The hon. Member for Wycombe (Mr Baker) touched on a stark irony when he referred to the old banking system in Scotland and the rest of the UK. I wholeheartedly agree with him that strict joint and several liability incentivised a good culture and good practice, but the pendulum has swung entirely in the other direction. I will come on to discuss the crux of the issue, which is banking culture, but he made that point well.

[Hannah Bardell]

On culture, a number of people dealt with my constituent over many months, and he felt that the culture being driven by the bank was not for the majority. We want to believe that most people who work in the banking sector are good people, but the culture being driven from the top of those organisations means that staff end up moving and are deeply dissatisfied at not being able to serve customers properly.

[Richard Arkless]

My hon. Friend will be unsurprised to hear that I completely agree with her. My experience is that, although many good people work in banks and we should not tar them all with the same brush, which we are inevitably tempted to do, banks see businesses and individuals in the retail sector as units to extract revenue from. Unless banking returns to being an ethical practice of looking after people’s interests, as opposed to extracting revenue, we will not make the vital cultural change necessary to sort out the issue.

I was particularly struck by what my hon. Friend the Member for Coatbridge, Chryston and Bellshill (Philip Boswell) said: even before a contention is raised, there is a reluctance to complain. Banks feel the inequality of arms before we even get to the courts or a dispute resolution system. I think that is a consequence of the public perception of the inequality of arms, and it has produced a fear factor. Clearly, an ADR system would go a long way to reducing that fear factor among SMEs.

That point was corroborated by the vice-chair of the all-party group on fair business banking, my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr). He also made a good point about the Financial Ombudsman Service and inconsistencies in the adjudication of retail banking issues. During my time at a bank, I had many dealings with the FOS, and I assure Members that it was possible to put to it two cases with exactly the same facts and circumstances and get two completely different results.

The right hon. Member for North Norfolk (Norman Lamb) made an excellent and powerful speech, from which I took two points. The first was the effect on mental health and wellbeing, which is often forgotten about; we are not just talking about economic consequences. The second was whistleblowing, which was picked up by my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin). The right hon. Member for North Norfolk will be pleased to hear that we intend to table two amendments to the Criminal Finance Bill. One will seek protection for whistleblowers, and the other will ask for a banking culture review. I would be grateful if he would consider them with his colleagues and perhaps support them in due course.

My hon. Friend the Member for Edinburgh West (Michelle Thomson) wowed this Chamber last week—I think that deserves a mention—and I do not think that any of us could have failed to be struck by her reference to the Komodo dragon. She attacked the underlying culture in banks and said how predatory they can be.

My hon. Friend the Member for East Renfrewshire (Kirsten Oswald) made an excellent speech. I was particularly struck by her example—not a commercial case, but a retail case—of an ordinary individual whom the bank are accusing of going to another branch with identification and withdrawing money. Surely the complaints process could look at the closed circuit television and the FOS could be more inquisitorial in assessing the case. I hope that that message will go out.

When I worked for a bank and a retail customer threatened to take a matter to the FOS, we were told very clearly that that incurred a cost to the bank. I forget the exact figure, but it was between £400 and £600. When it got to that point, a quick calculation was made, and if the case could be settled at less than £600, that was what happened and the bank was not dragged through the FOS. That just demonstrates that we are units to extract revenue from, and nothing more.

I agree with my hon. Friend the Member for Aberdeen South (Callum McCaig), who was the first to say that the ADR system in itself will not fix the entire problem. He was absolutely right to mention culture. On RBS’s approach, he was told that this was water off a duck’s back, and that is absolutely true: these are actuarial, commercial calculations. The human cost is completely negated. A calculation is made of liability and potential cost, and the bank will take whichever is lower.

That concludes my summary. If I missed out any colleagues, I apologise. I agree that it would be a good idea to ease access to justice for SMEs that have contentious issues with large banks. That would make it cheaper and easier, and it would certainly help to equalise the inequality of arms. However, whether a case is considered by the FOS, a small claims court, a fast-track court, the Supreme Court, the Court of Appeal or an ADR, it is the same case, with the same contract and the same terms and conditions, that will be considered from court to court, and if all those dispute resolution vehicles do their job, they ought to come to the same conclusion. Although that would be a welcome step, we need to go beyond that and look at the reasons the organisations were sold the products in the first place. That points to the culture perpetuated by the banks. If we can fix the culture and the over-aggressive mis-selling of products that businesses and retail customers simply do not understand, we will not end up in a situation where we need an ADR. Although I welcome the proposal, we need to change the culture in order to make a real difference.