Banking Misconduct and the FCA

Neil O'Brien Excerpts

Thursday 10th May 2018 Commons Chamber

[Neil O’Brien (Harborough) (Con)]

I congratulate the hon. Member for East Lothian (Martin Whitfield) and the all-party group on fair business banking on securing the debate. I follow very powerful speeches by the right hon. Member for North Norfolk (Norman Lamb) and my hon. Friend the Member for Dumfries and Galloway (Mr Jack).

A constituent of mine, Mark Nicholson, had an experience with HSBC that raises exactly the issue as many of the RBS cases. He has been in dispute with that bank for eight long, stressful years. His business initially had a cash-flow problem, through no fault of his, and the bank turned his secured loan first into an overdraft and then offered him a nine-year loan. However, despite complying with every single condition, the promised nine-year loan was never forthcoming and he was instead put on a treadmill and offered a series of short, one-year loans at increasingly high interest rates, with increasingly high charges.

In 2014, the Financial Ombudsman Service ruled against HSBC, telling it to restructure the loan and to repay all the charges. Instead of complying with the spirit of the ruling, the bank seized on a lack of detail in it to offer my constituent an onerous loan. After a second ruling, he is still in dispute. The bank is refusing to share the details of how it has calculated the demands that it is making of him, and at the end of this month he faces a court hearing in which he could lose the house that he has lived in for nearly 30 years. It is exactly as my right hon. Friend the Member for Loughborough (Nicky Morgan) said of RBS: it is a case of the pursuit of profits through made-up fees, high interest rates and the attempt to acquire equity and property. I have written to John Flint, the chief executive of HSBC, to support my constituent in this matter, and I plead with him to think again about the way in which his bank is treating my constituent.

The theme of today’s debate is the other institutions that surround this important problem. Although the Financial Ombudsman Service has done good work and has helped some people, we must ask two questions: first, does it have the power and authority to make large financial institutions fear it and comply with its rulings? For my constituent and others, we can see that that is not the case. Secondly, does it have the technical capacity to cope with some of the more complex cases that it faces? Another constituent is involved in a technical insurance case, and the Financial Ombudsman Service has not been able to do what we need it to do, which is to level the playing field between large financial institutions with a lot of firepower and ordinary members of the public.

Let me quote some of the things that Channel 4’s “Dispatches” discovered when it did an undercover investigation into what was going on in the Financial Ombudsman Service. It talked to trainers and people working within the organisation. Here are some quotes from what it heard:

“Training was not adequate. We rushed through complicated financial issues and processes. I often didn’t know what I was doing.”

“I’m not proud to admit it but I’ve done it myself—just taken a chance and just slung stuff through, with any old decision.”

“For more complex cases, the right decision isn’t always reached. Legitimate claims are being missed.”

“even now I look at an investment case and I don’t know what to ask for.”

“Sometimes I’ve not even heard of the products. I have to Google what it is first.”

“11,000 cases fell into a black hole. Two years later we find out they’ve not been looked at and we had to work our way through them all.”

“Some post was two years old. There were cases saying I am going to lose my house.”

That is simply not good enough. We need to replace the FOS with something that is fit for purpose, because my constituent also faces losing his house.

It is worth noting that over the last eight years we have made a lot of progress on reforming the financial system. We have introduced measures to increase competition and to encourage challenger banks. We have seen the ring-fencing of retail banking from investment banking. We have replaced the failed tripartite system and ended “too big to fail”. We have higher capital requirements, the bank levy and the tougher claw-back regime. A lot has been done, but a lot more needs to be done. The next step now should be to replace the Financial Ombudsman Service, which could do more to help our constituents, with something that has proper expertise and the ability to make large financial institutions, which so often behave in a cruel, high-handed way, frightened of it and get justice for our constituents.