Financial Conduct Authority Redress Scheme

Jonathan Edwards Excerpts

Thursday 4th December 2014 Commons Chamber

[Paul Farrelly]

It is indeed a disgrace. RBS has form not only outside the House, but inside it. The Chair of the Treasury Committee recently said that the bank had misled it. He said:

“If this is how RBS deals with a parliamentary committee, how much can customers and regulators rely on it to be straightforward with them?”

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The hon. Gentleman makes an important point on refinancing. One of the main difficulties that my constituents, Mr and Mrs Bartels, got into was that they were unable to refinance their mortgages as a result of the interest rate swap on their current mortgage, which led to the demise of their business. That is not addressed in the redress scheme.

[Paul Farrelly]

Given the cash flow difficulties of firms such as DK and penal interest rate payments, they have problems financing their work in progress and stock. DK had to retrench, through which jobs were lost. Fortunately, it is now back on its feet and successful again, but it is allowing me to share its experience because so many other businesses are afraid of sharing theirs, for different reasons.

By September last year, when the FCA replied to my follow-up letter, in which I reiterated those fears, Christina Sinclair had gone—she had joined a bank as a senior member of compliance, in the latest twist in the regulator merry-go-round. The reply was from her successor, Andrew Giles, who, I believe, is still the FCA’s acting director of retail banking and therefore responsible for the scheme. His response to what we might call the fear factor was as follows:

“If having submitted a complaint to RBS, DKM has evidence of the bank attempting to penalize the business, DKM should send it to us… We would consider this in the context of our wider work in this area and in particular in relations to our ongoing supervision of RBS. Unfortunately”—

here is the clincher—

“due to confidentiality restrictions, we would not be able to say how we have used the information provided.”

What a great backbone stiffener that is for a small businesses. It is as useful as a chocolate fire guard, as we say in the potteries. Yet again, the FCA, as a regulator, is letting down businesses such as DK.

Mr Giles also said that the review did not stop the likes of DK going through the courts. Having been let down by the regulators, and having been rebuffed after asking RBS directly for redress, that was the only option available. DK considered it again and again, but decided not to go through the courts. It is no longer an option, because the statute of limitations on this sorry saga started six years ago and has just run out. The reality was that DK faced a possible legal bill of £250,000 and possibly twice that if it lost to RBS. Like many small businesses, it simply could not afford the costs and risks of going to court.

I shall conclude with a few remarks on what DK and we would like to happen. One key thing is for the FCA to review its scheme for redress from banks. As a regulator, with Government backing, it should push through changes. DK wants to be able to appeal to an independent assessor against the finding that it was a sophisticated customer, just as banks were able to do under their get-out. When I pressed that with the FCA last year, Mr Giles said that, had that been allowed from the beginning, it would have slowed the process down and led to lots of small businesses not being compensated so quickly. We have seen great progress over the past year, so that argument holds no water today, and certainly not if the process completes in June 2015. It is not an argument against the regulator or the Government acting more effectively in pursuing the mis-selling of such damaging products.

As far as RBS and customers such as DK are concerned, the Government could cut through directly, because RBS was bailed out by the taxpayer after its folly and perfidy and is still owned by the taxpayer. All the major banks have been tainted by that scandal, but, as the FCA figures show, RBS was by far the worst offender. Of the 15,400 sales at redress offer stage at the end of September, 7,300—nearly half—belonged to RBS. That is just the number of businesses who were admitted and not excluded from the scheme, not the size of their exposure.

That suggests wholesale pumping of those toxic products down the RBS sales pipeline. The Government should address that as the majority owner of the bank. They should force the bank to have fully independent handling of complaints from customers such as DK that have been excluded from the scheme, in the interests of businesses, in the interests of a thorough clearing of the stables and in the interests of the future of RBS and therefore of the taxpayer when it is finally sold off.

My final thought is on consistency and the different attitudes of banks to the review. Given the scale of RBS’s participation in the scandal, the Government should satisfy themselves, before RBS is sold off, that they are reserving the costs of its mis-selling in a way that reflects the reality of its involvement.