Financial Conduct Authority

Mark Williams Excerpts

Monday 1st February 2016 Commons Chamber

[Mr Mark Williams (Ceredigion) (LD)]

I pay tribute to the hon. Member for Aberconwy (Guto Bebb) for his persistence in pursuing this cause. I counted three debates that he had initiated with the support of the Backbench Business Committee, but he reminded us that there have now been four. I spoke in the first three, and I now speak again on behalf of my constituents who have been affected specifically by the mis-selling of interest rate swap products. Many of them have been denied justice, notably those who were sold tailored business loans or hidden swaps, largely by Clydesdale and Yorkshire bank, and who have been denied any semblance of justice.

I am compelled again to mention the case of my constituent Mr Mansel Beechey of the Hen Lew Du public house, which was well known to the hon. Member for Aberconwy in his student days. That excellent establishment is in the heart of my constituency. Mr Beechey first complained about the sale of his tailored business loan—shamefully, an unregulated product—back in 2012. It took Clydesdale and Yorkshire six months to respond to that formal complaint, and even now the matter remains unresolved. Cynics would suggest that there is an expectation, or rather a hope, that it will be kicked into the long grass and disappear. The reality is that much of the bank’s lending is done through TBLs, which fell outside the remit of the FCA review, with the result that sufficient redress has been avoided.

I remember when the hon. Member for Aberconwy first told those of us who were involved in his “bully banks” all-party group—the all-party parliamentary group on interest rate mis-selling—that a voluntary review was forthcoming. There was an acknowledgement that the glass was half-full, there was an expectation that it might well fill up, and there was a hope that the proverbial spotlight would be shone. With hindsight, however, and given the bitter experience of many of our constituents, we see that the process lacked transparency and rigour, was neither robust nor effective, and was significantly skewed in favour of lending institutions.

We looked to the FCA to sort that out. When the FSA morphed into the FCA, we were assured that the new organisation would enforce rules, punish breaches, and focus on the behaviour of financial professionals. That is why there was such huge disappointment in the decision, sneaked out around new year’s eve, not to undertake a review of banking culture.

What concerns me most is that the redress scheme brokered by the FCA excluded a huge number of people, even before the process of drilling down and examining the inadequacies of the scheme. As the hon. Member for Aberconwy said in his opening remarks, it excluded many people through its definition of “sophistication”. It also allowed some commercial lending to remain unregulated. As it was so narrow and restricted, it did not deal with the reality of what went on. As it stands, it will not change or reform banking behaviour or compensate people properly.

If the FCA’s review process was transparent and fair, why were customers not given a chance to view the evidence that the banks presented to the review panel, and, if necessary, given a chance to comment on it? Why does the FCA fail to see that there will always be suspicion and mistrust while the process is shrouded in secrecy, and customers are denied an opportunity to view the evidence of the banks’ own review team? Why is the controversial issue of the offer of alternative products as part of the redress scheme not being addressed? Reviewers seem intent on suggesting that if my constituents had not take out a particular type of hedging product, they would almost certainly have taken out something very similar. That is currently the position of my constituents Mr and Mrs Collier of Aberaeron, who were offered derisory compensation and another almost identical product. Is it really the case that providing customers with an alternative product as part of the redress is a widely established and accepted principle?

Until the faults of the current scheme are rectified or remedied, and until the FCA addresses these issues— including, critically, TBLs—I am minded to support the motion. We need a truly independent, comprehensive, forensic examination, and a comparison of a sample of sales of historic interest rate hedging products involving all banks, all product types, and a range of customer profiles. We need a re-examination that relies not just on banks’ records, but on customer testimony and a full review of documentary evidence.

In the meantime, I look at the landscape of my constituency, which has clearly been targeted by tailored business loan salesmen. At one point, my constituency office was working on 30 cases across Ceredigion involving asset-rich businesses, hoteliers and farmers. We even took out an advertisement in the local newspaper to glean whether there were more cases, and they were forthcoming. Many of those businesses have now gone; some are hanging on but have been unable to grow to their full potential. Those constituents have no trust in the banks and no trust in the FCA. We regard with disdain the abandonment over the new year of the review into banking culture, although perhaps it was not altogether surprising to my constituents, given their experiences. What an indictment of the FCA!

This pattern was repeated in every constituency in this country. Every one of the hon. Member for Aberconwy’s debates on this subject has revealed a huge range of experiences. I think that we in this House all know that businesses have been targeted by the banks, but has that been acknowledged sufficiently by the regulator? It did nothing when the mis-selling was going on, despite an emerging pattern of complaints. There should be an obligation to investigate further when such a pattern emerges. Nevertheless, it continued to do nothing for seven years, and a decade on many businesses have still had no redress.

The regulatory response to mis-selling, from the FCA and the Financial Ombudsman Service, has focused on the wrong question. Instead of asking why the banks were trying to sell interest rate products at all—the culture question—the focus has been on what businesses would have done had they not picked the product they were offered. Let us take the example of Mansel and Sandra Beechey. Their product was not included in the FCA review despite the fact that fixed-rate loans were to all intents and purposes the same as a stand-alone product. The FCA continues to maintain, as have Ministers, that those products remain outside regulatory protection. There has been no compensation. Richard and Lee Collier’s case was part of a review. They suggested that they would most definitely have taken an alternative product. That alternative product was two months shorter than the one they signed up to and with a base rate that was 0.12% lower. That is unacceptable. Huw and Jackie Roberts were denied the 8% interest on over £30,000 for their business. That too is unacceptable.