Financial Conduct Authority Redress Scheme

Paul Farrelly Excerpts

Thursday 4th December 2014 Commons Chamber

[Guto Bebb]

Of course not. The whole reason behind establishing the redress scheme is to try to deal with the wrongdoing of the banks. My concern is that the scheme has not succeeded as expected.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

rose—

[Guto Bebb]

I will take one final intervention; otherwise I will be told off by Mr Deputy Speaker.

[Paul Farrelly]

Does the hon. Gentleman agree that the level of provisioning in the banks suggests that there is inconsistency? For instance, in RBS there were 7,300 cases and £1.4 billion of provisions, while in Barclays there were 2,900 cases and £1.5 billion of provisions.

[Guto Bebb]

The hon. Gentleman makes an important point. There have been concerns throughout the process about the level of provision within banks. In view of some of the information provided by the KPMG whistleblower, RBS’s confidence in having a very low level of provision probably justifies its attitude to the review.

Another point about the lack of consistency relates again, unfortunately, to the behaviour of RBS. It has been argued that a good result for a business from the redress scheme is to have a full tear-up of the agreement or to implement a cap rather than a swap. Indeed, it has been argued that a cap would in many cases have been a much better original product. From the detail of many of the caps offered to RBS customers, it transpires that most of them are for 10 years. I do not claim to be an expert, but experts in the field of derivatives and interest rate protection tell me that there is no demand in the marketplace for a 10-year cap. They have challenged RBS to give one example of a 10-year cap that it has sold commercially in the past 10 years, but as yet RBS has not come back with such an example. Yet, time and again when businesses are offered a cap as an alternative product, the cap is for 10 years. It will not surprise hon. Members to learn that a 10-year cap is significantly more expensive than a five-year one. That added cost comes out of the redress made available to the relevant businesses. There are therefore questions to be asked about the behaviour of some banks, including RBS, and those questions raise doubts about the consistency of the scheme.

On transparency, I am concerned that the agreement between the banks has not been disclosed. That means that it is very difficult to assess the success or otherwise of an outcome, because we do not know what to measure it against. The agreement has not been made available to the all-party group or the Treasury Committee, but I must ask why, because when the FCA says that it is robustly ensuring that the agreement is maintained, we cannot assess whether that is the case.

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[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

I want to talk about one of my local businesses, DK Motorcycles, which has been badly let down not only by its former bank, the Royal Bank of Scotland, but by the Financial Conduct Authority and the partial scheme of redress over the mis-selling of interest rate products. Having finally escaped the clutches of RBS, this is the first time that the firm has felt confident enough to allow me to talk about its experiences in public, and its general manager, Ewan MacDonald, is sitting in the Gallery today, alongside many people from small businesses who feel bullied by their banks and let down by regulators.

DK Motorcycles entered into a 10-year LIBOR swap with RBS in August 2008, but there was nothing voluntary about it. The swap was an express condition of refinancing, but as interest rates fell, it later became clear how the enforced sale had exposed DK, like many other businesses, to a penal interest burden. By the time DK had extricated itself from RBS’s clutches at the end of last year, it had shelled out in interest and penalty charges more than a third of the original loan of just over £2.4 million.

In May last year, I wrote to the chief executive of the FCA with concerns about the grounds on which DK had been excluded from the redress scheme. At that time, the company was in the hands of the now infamous global restructuring—for which read “destruction”—group at RBS and was staving off a scenario where RBS would put in one of its pet consultancies, which was, as so often, an insolvency firm, and for which DK would inevitably pay to watch the vultures feast.

On the redress scheme, my concerns were about the so-called sophistication tests and the limited lessons that the FCA had learned in findings from its pilot review. The redress scheme has excluded 10,500 of the 30,000 sales of so-called hedging products, on the grounds that such firms were sophisticated and therefore either knew or should have known what they were doing, or that they would have the wherewithal to go to court if the banks failed to deal properly with their complaints. None of that, sadly, applies to a business like DK Motorcycles.

[Steve Baker (Wycombe) (Con)]

I congratulate my hon. Friend the Member for Aberconwy (Guto Bebb) on securing this debate. On the point raised by the hon. Member for Newcastle-under-Lyme (Paul Farrelly), businesses in my constituency have still not had explained to them how the charges are calculated. Does he agree that that is another area where the banks have failed, because it is clear that they have sold a product that even now is not well understood?

[Paul Farrelly]

Indeed, not only have the banks failed but the regulators have failed to show their teeth. Indeed, in the recent judgment on Crestsign the courts have only added to the uncertainty, and it behoves the Government to try to clear that up.

DK Motorcycles runs the largest motorcycle showroom in the country, selling high-value items from a single premises. It is a partnership, owned by father and son Derek and Kevin Neesam—hence the DK. At the time of the refinancing in 2008, it had a bookkeeper but not a specialist finance director. Ewan, the general manager, joined later and now looks after finance, as well as running the showroom. By no stretch of imagination could DK be called “financially sophisticated” in a world of complex derivative products. However, by dint of employing up to 75 people—both full and part time—and having a business turnover of £20 million, it failed two of the FCA’s tests. In response to the pilot, the FCA admittedly amended some of its tests, but no flexibility was applied to the turnover test. As I pointed out to the FCA, that caught different types of businesses indiscriminately and left businesses such as DK bracketed together with the likes of BP or BT as so-called sophisticated, and therefore with no help against predatory banks such as RBS.

There was a further iniquity in the redress scheme, as the campaigning group Bully-Banks has repeatedly pointed out, because under the scheme, banks have a get out. Notwithstanding the tests, if they can offer evidence that a business was financially sophisticated, it would be excluded from the review. However, there was no reciprocal ability for businesses like DK—a father and son partnership that just happened to be successful and passionate about selling motorbikes—to offer evidence suggesting the contrary.

I did not get a reply directly from the chief executive of the FCA. Instead, at the end of June 2013, a reply came from Christina Sinclair, then acting director of retail banking in the supervision division. The reply did not tell us any more than we already knew, and it still stressed DK’s ability to lodge a complaint with RBS directly. Ms Sinclair singularly missed the point made by DK and many other businesses that, given their experiences so far, they were frankly petrified of making a formal complaint for fear that the bank would pull the plug on the business. From what I have seen of RBS, they were right to be frightened.

In the interim, DK, like me and all hon. Members in the Chamber, had seen the Tomlinson report and all the stories about the global restructuring group into which DK had been shunted. At the end of last year, DK finally found alternative bankers who were willing to take a proper, unsullied credit decision, but as a parting shot, RBS, in the form of their so-called relationship manager, the inaptly named Vicky Smart of the global restructuring group, said it did not want any of DK’s business any more and withdrew crucial direct debit support for DK’s customer finance arm. Fortunately, DK managed to overcome that apparent act of spite and the new bank put alternatives in place. RBS has continued to deal with DK in that way, refusing any meetings about redress and insisting on communicating through lawyers.

[Steve Rotheram]

It will be cold comfort to DK that the sorry tale my hon. Friend outlines is almost a mirror image of what has happened to a business in my constituency. I am sure other hon. Members will extol the virtues of companies that have also fallen foul of RBS. As I suggested to the hon. Member for Aberconwy (Guto Bebb), does my hon. Friend think that it is a disgrace that the very banks that caused the financial crash benefit from selling sophisticated derivatives to organisations that did not fully appreciate what they were getting into?

[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.

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[Sir Edward Garnier]

I could not agree more. The banks and the FCA must take responsibility for what they have done, and if that requires the urging of the Treasury, please let that happen. These banks are making vast amounts of money, and although I am a Conservative capitalist and like companies to make profits, I expect them to behave properly.

[Paul Farrelly]

Do the hon. and learned Gentleman’s constituents feel that they were advised by the bank to take on that collar? I ask because in the recent Crestsign case it was found that a company had been advised by RBS, but the bank was none the less allowed to rely on its disclaimer that it has not given advice. Does he agree that that legal position only compounds the uncertainty and the risks posed to businesses that take the banks on?

[Sir Edward Garnier]

I will not comment on the legalities or illegalities involved in that specific case, but I will say in relation to the case to which I have referred that the bank not only failed to explain the risks of moving into a new loan vehicle fully, properly and candidly, but subsequently sought to hide its own responsibilities for its failures. Such action, besides being—in my view—immoral, lowers not just the trust and confidence that small businesses should have in the retail banking sector, but the collective confidence of Members of Parliament, who should hold the Government to account for those failures if they are such, and if they occurred on the Government’s watch.

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[Bill Wiggin (North Herefordshire) (Con)]

I shall not trouble the House for too long, but I must draw its attention to my entry in the Register of Members’ Financial Interests.

My constituents William and Frances May have brought the actions of UK Acorn Finance to my attention. I understand that the problems with UK Acorn Finance have been raised many times in the House over the past seven years and that at least 40 Members have Acorn victims among their constituents. My constituents tell me that the Financial Conduct Authority claims that it has an insufficient mandate to investigate, while the Financial Ombudsman Service compensation ceiling is inadequate for many commercial businesses impacted by UK Acorn Finance. My constituents would like to know what action the Government are taking to regulate and investigate effectively the actions of the company and whether it should even be allowed to continue trading.

The Connaught Income Fund will also be familiar to many colleagues. It was incredibly disappointing to learn last month that investors and all parties had failed to reach a negotiated settlement to address investor losses in the Connaught Series 1 fund by the FCA, the deadline being 31 October. Will the Government maintain the pressure on the FCA to ensure that it continues to work actively to sort out this mess?

Another of my constituents runs a company called Pixley Berries and claims that he is currently

“receiving the same treatment from HSBC as widely published with reference to RBS.”

My constituent has refused to go along with it and is in the process of transferring to another bank. Meanwhile, he has consequential losses of some £500,000, so he estimates that the interest rate hedging product he was mis-sold set back his business by £500,000. He has received £200,000 in redress, but in terms of well considered and evidenced consequential losses he has been offered £5,000 against a claim of £190,000. The reality for a business such as his is that there has been no change in conduct. Does the Minister agree not only that the FCA redress scheme needs to be improved, but that the banks need to change their behaviour fundamentally?

[Paul Farrelly]

Given that the hon. Gentleman has mentioned RBS, which is owned by the taxpayer, may I add to my previous remarks? DK Motorcycles was not only bounced into the global restructuring group at RBS, but bounced back and forth between Birmingham and Manchester several times. Is it not a duty of the Government to make sure not only that the stables are properly cleaned, but that the shark cage is emptied so that the activities of people in the bank are brought to book and we can have more confidence in RBS in the future?

[Bill Wiggin]

What is not to love in an intervention about motorcycles? I thank the hon. Gentleman for that. Obviously, the Minister is going to speak, so I will not take too much time. It is right that she should have the opportunity to explain the Government’s position, but the hon. Gentleman’s point about confidence is absolutely right.

The campaign group Bully-Banks has a number of suggestions—many colleagues have mentioned them—on how to improve the FCA redress scheme. One suggestion targets the fact that many small and medium-sized enterprises were excluded from the scheme because they were deemed to be “financially sophisticated” and therefore able to understand the interest rate hedging product sold to them.

The Government need to create an independent appeal tribunal to determine whether a company was in fact “financially sophisticated” and therefore able to understand what it was buying. One company that would benefit is allpay, which is in my constituency and with which I have worked. It was excluded from the redress scheme because it had more than 50 employees at the relevant time. That cannot be a qualification for understanding a complex financial instrument, so I urge the Government to consider the issue carefully. Apparently allpay falls outside the FCA’s unique version of what constitutes an SME, and that cannot be right. That company lost £2.25 million and it has spent the past five years paying it off.

I appreciate that an extension of the FCA redress scheme might open the floodgates to a wave of new claims against other banks and trigger a significant increase in their provisions for mis-selling liabilities. However, I want the Government to support all affected businesses, of whatever size, in this matter. As I have said, the campaign group Bully-Banks wants an independent tribunal to determine “financial sophistication”. It wants the redress scheme to be extended so that appeal tribunal decisions are based on what actually happened, not on the size of the company.

I will not detain the House a great deal longer. The FCA has a difficult job, but an important one, and I believe I am registered with the FCA in one of my roles. My plea is for it to focus its efforts on the people who have done the wrong thing, rather than increase the burden of regulation on people who are doing the right thing.

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[Cathy Jamieson]

The hon. Gentleman makes a good point, and some of the concerns and examples have been about banks that seemed to be selling products, but not outlining the potential for interest rates to drop or giving customers information about the bank’s own forecasts. We have real difficulties with such circumstances.

[Paul Farrelly]

One issue that arose in many cases is that firms were not given a choice—the issue of conditionality, when a loan was advanced only if the customer took out a hedging product that was acceptable to the bank. I would want confidence that an easy test is being applied in the review process: if the bank was not the provider of the product, would it have accepted the company entering into an open-ended obligation? If the answer is no and the bank would otherwise have refused the loan, the sale was clearly inappropriate.

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[Cathy Jamieson]

Indeed, the hon. Gentleman makes a useful point and similar circumstances have been brought to my attention of people who thought at the point of signature that all they were signing was a refinancing agreement, and they had not understood the full consequences. We must drill down on those issues to ensure that people get the justice they deserve.

In some instances, product sellers painted only a partial picture of the product and the nature of the protection offered—I see the Minister is listening intently and I am sure she will agree. That resulted in customers purchasing products that were not appropriate to their circumstances, with the result that they lost money or spent money unnecessarily.

In the review, the FCA draws a distinction between sophisticated and unsophisticated customers. Under the terms of the agreement with the banks, only the cases of customers deemed to be unsophisticated were subject to the review. The FCA defines unsophisticated customers as those less likely to have had the expertise or resources to seek advice before purchasing an interest rate hedging product. People might suggest that that is a common-sense distinction, and one that correctly focuses on customers who were less likely fully to comprehend the nature and consequences of the product they were being sold, but the question of how the distinction was arrived at is an entirely different one. It will be interesting to hear the Minister’s view on that, and on the question of whether people ought to have the opportunity to appeal if they were put into the sophisticated category.

[Paul Farrelly]

I was going to ask the Minister about the tests but, as my hon. Friend has mentioned it, I will ask her. The tests applied in the review reflect the definitions in the legislation that allows small companies to file less information than large companies. The test of sophistication is size, and yet small-ish or relatively small firms were deemed as sophisticated. Does she agree that that needs to be reviewed?

[Cathy Jamieson]

My hon. Friend once again puts forth his points coherently. I am sure the Minister is considering her response. We must always look for unintended consequences. Did the review pull in all possible situations? Perhaps it could pull in more if the Minister is of a mind to look at things slightly differently.

Non-advised sales perhaps strayed into advice. The FCA describes non-advice sales as ones in which

“no personal recommendation is made and you leave the customer to decide how they wish to proceed.”

There is an analogy with other generic advice. If someone recommends that a person should buy household contents insurance without mentioning a specific insurer or policy, and if the recommendation is unconnected with the sale of a contract, that would not fall within the definition of advice. The FCA is clear that sales staff should avoid making personal recommendations, and therefore giving advice. It states that sales staff

“should confirm that the decision is the customer’s and that the”

salesperson “cannot give them advice.” The problem in many of the situations we have heard about today appears to be that sellers actively recommended and even promoted IRHPs to customers. My hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly) outlined that in some detail, as did my hon. Friend the Member for Dumfries and Galloway. There were devastating consequences for businesses and lives in those situations.

I have criticised the sales-driven culture—the culture of targets, rewards and incentives—in the past. The banking sector will say that it is trying to address that culture and to move to a different approach, but the reality is that the culture was imported into retail banking from the more speculative areas of investment banking, where the risks were greater and the rewards higher. It simply was not appropriate for many of those small businesses and customers. Some of the overt incentives to sell such products, whether or not they were in the customer’s interest, have been removed, but I continue to worry. I want the Minister’s assurance that we are on top of the situation, and that there is no indirect pressure on staff to sell those products. We need to continue that culture change in our banks. That has to come from the top and go right through to the bottom.

On the perceived problems with the FCA scheme, the scheme was supposed to ensure that small business customers who were mis-sold products received an offer of fair and reasonable redress as soon as possible. The FCA tells us that more than 99% of redress offers have been communicated to almost 17,000 small businesses. More than £1.5 billion has been paid out in redress so far, including £300 million in compensation for lost opportunities. However, I think it would be fair to say, given the debate this afternoon, that it is evident that people still have concerns about the scheme’s shortcomings. I hope the FCA will take that into consideration, with support from the Minister. Customers who purchased caps that place a limit on interest rate rises are not included in the scope of the review, unless they have complained to the bank during the course of the independent review and are non-sophisticated customers. Other types of hedged loans were not included in the review process either.

My hon. Friend the Member for Newcastle-under-Lyme mentioned the case of Crestsign v. NatWest, illustrating the difficulty that some small businesses have experienced in getting redress from banks. The judgment in the case concluded that the bankers

“did not show themselves worthy of the trust that was placed…but unfortunately for Crestsign, the common law provides…no remedy because the banks successfully disclaimed responsibility for the advice they gave on the suitability of the swap, which was negligent but not actionable.”

In this case the bank managed to successfully argue that, since it did not owe its customer any duty of care, it had no obligation to pay compensation. We can see why people are concerned. The bank was able to argue its case after the event and was not held to account on whether it should have sold the product in the first place. Worryingly, the independent reviewer KPMG—independent reviewers are a crucial part of the FCA redress process—seemed to agree with the verdict. Does the Minister think that appeals need to be looked at?

I argued at the start of my speech that what we really need is cultural change.

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[Paul Farrelly]

Progress is undoubtedly being made, but that does not mean that lessons should not be learned. The hon. Member for Shrewsbury and Atcham (Daniel Kawczynski) rightly asked the Minister whether she would look at each of the cases named in the House. I urge her to do so. In addition, she should review the scheme and the way in which it was set up, leaving small businesses such as DK Motorcycles with no right of appeal. Will she commit to giving such businesses some hope of effective redress in the future?

[Andrea Leadsom]

I will certainly write to the FCA about all the cases raised in the Chamber today—and I will expect a reply.

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[Bill Wiggin]

Will my hon. Friend give way?

[Paul Farrelly]

Will the Minister give way?

[Andrea Leadsom]

I will give way once more, but not, I am afraid to the hon. Member for Newcastle-under-Lyme (Paul Farrelly), because time is short.

[Andrea Leadsom]

I can certainly tell my hon. Friend that the number of employees is a factor, but it is not necessarily the only factor, so the fact that a business has more than 50 employees may not necessarily make them a sophisticated investor.

[Paul Farrelly]

rose—

[Andrea Leadsom]

I am sorry, but I will not give way.

Many Members have mentioned the financial ombudsman scheme’s money award limit that it is able to offer to customers. This level was deemed to be most appropriate. It does ensure that most complaints made by consumers and micro-enterprises can be addressed, but reflects the fact that cases involving very large sums of money may be more appropriately dealt with by the courts, rather than an informal process that has limited prospects of appeal.

In the event that the financial ombudsman scheme considers that fair compensation requires payment of a larger amount, it can make a recommendation that a firm pay the balance. That decision on the higher amount is not binding on the firm, but there is evidence that suggests that firms that subsequently go to the courts will find the courts take into account the recommendation of the FOS in determining what the outcome should be.

[Andrea Leadsom]

I agree with my hon. Friend in principle, but, as I have just set out, the intention has been that the sophistication test captures those who are not sophisticated as well as those businesses that are small and do not have the means to go to the courts. In addition, if they have been to the FOS, the intention is that that would cover the vast majority of cases. As I have said, I urge Members to write to me with any specific cases that they want me to look at.

[Paul Farrelly]

Will the hon. Lady give way?

[Andrea Leadsom]

No, I am sorry. The hon. Gentleman has had many opportunities.

It is important to note that the aim of redress is to put the customer back in the position they would have been in if a mis-sale had not taken place. The FCA has been clear that the appropriate redress for each customer will be determined on the basis of what is fair and reasonable. This could include, for example, the replacement of an existing product. That might be appropriate in the case of a business that was highly leveraged. In these instances, it seems reasonable that redress can consist of providing the small business with the alternative product they would have purchased, and refunding the difference in costs incurred by the business as a result.

Members have raised the question of whether there should be a separate appeals process. I would, however, reiterate that the role of the independent reviewer is to be that appeal—to ensure that the process is fair and businesses have adequate opportunity to put their case. Furthermore, eligible businesses have recourse to a further appeal to the FOS if they are not happy with the outcome of their review.

Many Members also raised the issue of Barclays and its decision not to delink the original loss and consequential losses. I think at the moment that that decision is one for Barclays to have made, but after hearing the strength of feeling in the Chamber today I will write to Barclays to ask it to explain precisely why it feels this is fair to customers and to ask it to consider whether it would be willing to conduct its review in a different way. I understand that Barclays has agreed to split the payment for those customers in financial distress, but I will follow that up with the bank.

I shall now return to the specific points Members have made. The hon. Member for Newcastle-under-Lyme raised the case of DK Motorcycles, which failed the sophistication test. He made a very good case in supporting his constituents, and I will take it up on his behalf. He did not say whether the company’s situation was now resolved and he named RBS as the culprit. For many small businesses the new competition being promoted by this Government—the arrival of new banks, particularly in the SME market—will be vital.

My hon. Friend the Member for Redditch (Karen Lumley) named HSBC as the bank in the case of her constituents the Parsons, who had an ethical business. There were significant consequential losses and she felt that the offer made by the bank was not significant. The hon. Member for Dumfries and Galloway (Mr Brown) mentioned Barclays as the bank to the leisure park business in his constituency. He cited fear of talking to the bank as one reason why some small and medium-sized enterprises will not use this redress scheme—they are afraid of the consequences of taking on their bank.

My hon. Friend the Member for Hexham (Guy Opperman) gave an informative intervention, particularly about the risk of having to go to court and the fear of taking on a bank, given the inequality in the resources between a small business and a bank. I take that very much to heart. My hon. and learned Friend the Member for Harborough (Sir Edward Garnier) named RBS as the bank for his constituents Mr and Mrs Hamblin and their property company. He asked me particularly to lean on the FCA to ensure that it is doing a thorough enough job in enforcing the redress scheme, and I am happy to do that.

The hon. Member for Rochester and Strood (Mark Reckless) asked why information on redress is not shared in detail and why consequential loss claims have almost all been turned down. Information on bank-by-bank redress is available but in aggregate form. One reason that has been put to me for that is a sense that if a bank just pays out, there is an implication that they may have been guilty as charged, whereas in fact the ability to offer an alternative product will depend on the bank’s product range and its ability to offer a suitable alternative product. I will look into this further, but that is potentially partially an answer. On consequential losses, 8% of consequential losses is deemed to be sufficient in most cases, but, again, if Members want to write to me, I will look into individual points.

My hon. Friend the Member for Nuneaton (Mr Jones) talked about how linking simple to consequential losses is very unfair. He feels that the Financial Ombudsman Service is not able to enforce enough compensation. He should be aware that FOS is consulting in the new year on that point. He also mentioned the issue of the tax treatment of redress, and I will raise that with Her Majesty’s Revenue and Customs, as a fair point has been made by many hon. Members.

The hon. Member for Ceredigion (Mr Williams) raised the issue of tailored business loans, which I have already addressed.

My hon. Friend the Member for Beckenham (Bob Stewart) raised the case of Mr D’Eye, who was put into the RBS GRG and then administrators were sent in. The FCA is looking at the accusations that have been made about the way RBS has treated small businesses and will report on that in due course.

My hon. Friend the Member for Wyre Forest (Mark Garnier), an ex-colleague of mine on the Treasury Committee, made important points about the cohort of claimants who do not feel they have received justice. He discussed how this is the first major scandal the FCA has had to deal with and said that it should see that it is vital it handles it properly. I can absolutely assure all Members that I will do my best to ensure that that is the case.

The hon. Member for Brecon and Radnorshire (Roger Williams) raised the case of Springdew and how a mis-sale cost the whole community, naming Barclays in that case. The hon. Member for Redcar (Ian Swales) named HSBC and made the point that his constituent Stephen Lilley was sold an extraordinarily complex product. Finally, my hon. Friend the Member for North Herefordshire (Bill Wiggin) raised another case involving UK Acorn Finance, which the FCA is currently looking at closely.

I wish to conclude by saying that SMEs are the lifeblood of our economy, and it is vital that this Government do everything we can to support them. Therefore, I urge Members not only to tell me about specific cases, but to have confidence in the fact that the FCA and the Treasury are determined to get to the bottom of this.