Financial Conduct Authority Redress Scheme

Debate between Marcus Jones and Guto Bebb

Thursday 4th December 2014 Commons Chamber

[Guto Bebb]

I am grateful for that intervention. The issue of consequential losses is of significant concern, because when the FCA redress scheme was established it clearly said that consequential losses would be dealt with on the basis of accepted legal principles, and yet of the £310 million-worth of consequential losses that have been paid out, £305 million relates only to interest at 8%. In other words, claims for other consequential losses have been derisory under the scheme thus far.

I want to highlight two other concerns. Tax treatment of redress payments is a real concern that can be dealt with by the Government and, as I have said, I will also touch on the exclusion of those businesses sold embedded swaps.

I will be quick, because I am aware that many hon. Members want to speak. I have a simple first example of the lack of consistency. When the scheme was established, it was decided that consequential losses and the redress would be paid in one instalment. Many businesses argued that that was unreasonable and unfair, and as a result of the second Backbench Business debate on this issue, nine of the 11 banks that are in the scheme agreed that they would split those payments. The FCA, however, despite saying that it wanted a consistent scheme, has allowed two banks to continue to insist on a single payment. That is a clear example of a lack of consistency.

The evidence I have gathered also shows that there is a lack of consistency on outcomes within individual banks, which clearly raises a question about how the work of independent reviewers is being overseen. If they are coming up with conclusions and recommendations for redress that are significantly different for businesses with very similar problems, there is a question as to whether the work of those independent reviewers is being monitored properly.

[Mr Marcus Jones (Nuneaton) (Con)]

My hon. Friend has been a stalwart campaigner on this issue and deserves great credit. On transparency, is there not a question about whether those reviewers, the review process and the reports they provide are truly independent? Constituents of mine who have been caught up in this have not received any of that information.

[Guto Bebb]

I am grateful to my hon. Friend for his intervention and agree with his rather depressing analysis, because my second point is that there is a concern about the significant lack of consistency on redress among the banks. We have to draw the attention of the House to the accusation published in The Times this morning that some banks have been putting pressure on their independent reviewers to make recommendations for redress that are acceptable to the banks rather than to the business in question. The allegation is made by a whistleblower who worked for KPMG on the independent review of RBS cases. It reflects anecdotal evidence from Bully-Banks, the campaigning organisation, that RBS customers have a 12% chance of getting a full tear-up, which is significantly less than the 65% at Barclays, 89% at Lloyds Banking Group and 64% at HSBC. If this is a consistent scheme, it is difficult to understand how the outcomes for individual businesses in one bank are so significantly different from those in other banks.

One of my concerns about transparency is that the FCA is not making available figures that highlight the outcomes on a bank-by-bank basis. It is simply giving us global figures. I accept that my concerns are based on anecdotal evidence, but it does seem to match evidence from other sources, including that provided to me by an independent reviewer working for HSBC who claims that HSBC feels that RBS is taking advantage, and that from the whistleblower from KPMG who worked on the RBS redress scheme who claims that RBS is challenging any claim over £750,000. The evidence is stacking up that this is not a consistent scheme.

[Mr Marcus Jones]

I thank my hon. Friend for giving way again—he is being very generous. Does he agree that the FCA should look for consistency rather than simply come to us as constituency MPs when we raise issues and tell us, in effect, that it agrees with a bank’s independent reviewer without explaining why?

[Guto Bebb]

I could not agree more. Put simply, the regulator should be regulating its own redress scheme. It is simply not good enough for the FCA consistently to say that the decision has been approved by the independent reviewer if there are doubts about their behaviour.

--- Later in debate ---

[Mr Jones]

I thank my hon. Friend for his invention, and I will address that issue in a moment. I know that my hon. Friend the Economic Secretary takes a considerable interest in this and I am sure she will take that interest further as a result of what she has heard today. People such as his constituents and mine need action. One way in which they could get the redress would be if these people were properly protected under the umbrella of the ombudsman. My constituents qualify for the criteria of the ombudsman scheme, but the maximum award of damages the ombudsman can offer is completely inadequate. I have spoken to the Minister on a number of occasions and at some length about that. Many people are going to the ombudsman and finding that it is recommending damages above and beyond what it can impose. I am aware that some banks are willing to honour that, but I am also aware that in many situations banks are not willing to honour what the ombudsman is saying. That brings us back to the point about inconsistency raised right at the start of this debate by my hon. Friend the Member for Aberconwy.

At the moment, I would probably give the FCA five out of 10—some people may think I am being generous—in achieving its aims under the scheme. If the FCA and the Government want to get 10 out of 10 in the eyes of my constituents, the FCA needs to have more teeth—if it does not have the power to deal with these issues. They need to make sure that a number of things happen. First, they need to make sure that all banks decouple the payment of simple damages from the matter of consequential loss. They also need to compel banks properly to assist their customers to assess their loss.

[Guto Bebb]

Although the FCA scheme says there is no need to get professional advice to help with the consequential loss claims, the evidence seems to suggest that the people who have taken on such advice have a better outcome than those who have not. Is that not another example of inconsistencies?

[Mr Jones]

My hon. Friend is absolutely right about that. The issue of consequential loss is reasonably simple in some cases but extremely complex in others. Even in the most simple cases it is difficult for the people involved. We must not forget that they are “non-sophisticated customers” and it is difficult for them to assess their loss, so they should be helped in that.

Let me highlight a number of other things that must happen to make sure that people are satisfied that they have had a fair deal from this process. There needs to be far more transparency in the review process, for the reasons mentioned by right hon. and hon. Members. The banks need to be compelled to divulge the identity of the reviewer, and all the correspondence and other supporting documentation in relation to that review process. There also needs to be a review of the maximum level of compensation the FCA can award, to make sure that all small businesses are truly protected without having to go to law.

Finally, my hon. Friend raised an extremely important point about the tax treatment of people who get compensation. I know that the Government have already set a precedent in this regard; it may have been not for commercial loss suffered, but in relation to the Equitable Life scandal, which this Government have done their best to clear up. The payments made by my right hon. Friend the Chancellor to people affected by that scandal have not affected recipients’ tax positions. It is extremely important that we look carefully at this to make sure that the same applies in this regard.

This issue is about fairness; it is about fair redress for the loss that people have suffered. That redress can be fair only if the FCA scheme and the ombudsman can truly put people affected by this scandal back in the position they were in before they were mis-sold these awful interest rate hedging products.

Fairness and Inequality

Debate between Marcus Jones and Guto Bebb

Tuesday 11th February 2014 Commons Chamber

[Guto Bebb]

As the hon. Lady knows, as I have already touched on the minimum wage, I believe that it is a complex issue that must be considered carefully. My view is that we should carefully consider moving towards a point where we do not need tax credits, as the imperative is to allow people to earn a living and pay as little tax as possible on their earnings. That should be the aspiration.

[Mr Marcus Jones (Nuneaton) (Con)]

My hon. Friend mentions the issues caused for his constituents by the way in which the Labour party dealt with income tax and the tax threshold, but were they not compounded by the removal of the 10p tax rate?

[Guto Bebb]

It undoubtedly did not help.

When we discuss inequality we should be aware of the key point that the Government have been very proactive in ensuring that the inequality faced by pensioners is dealt with. We can compare the impact of the triple lock on pensioner poverty with the previous Labour Government’s decision to increase pensions by a paltry 75p.