Financial Conduct Authority Redress Scheme

Russell Brown Excerpts

Thursday 4th December 2014 Commons Chamber

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

I congratulate the hon. Member for Aberconwy (Guto Bebb) on what can be classed as nothing less than sheer determination in continuing the battle for justice for so many businesses the length and breadth of the country.

I would like to think that we could use the words fair and equitable today, but this issue is anything but. I suspect that by the end of my speech I will have come to a point where I support the hon. Gentleman and the all-party group. We have all witnessed a lack of consistency and a deplorable lack of transparency. We look down on a situation that far too many business people have experienced, bringing them to their knees. Many have been broken. The fact that there is no appeal process is, quite frankly, unbelievable. People have been put in a “take it or leave it” situation and their plight is just not acceptable in this day and age.

The hon. Gentleman referred to the 10-year cap. This is a product that no one wanted: it was not sold to people, but forced on them. The campaigning group Bully-Banks yesterday put out a press release that sums it all up. It said that more than 90% of sales reviewed by the banks had been mis-sold. There is no argument: the banks’ conduct in selling these products was misconduct. Nothing could be clearer.

The first contact I had relating to this whole sad saga was about six years ago when a constituent came to see me. I have to admit that, not coming from a financial background, I had great difficulty in understanding what he was telling me. I have shared this experience with others in the House before. This was a guy who, along with his father, had worked for more than 20 years in the leisure park industry. Their bank, Barclays bank, had decided to set up a specific arm to offer products and loans to businesses for investment. After an approach from the bank, they decided to take out what turned out to be a hedge. After some time, they were then encouraged to change product. Some of the penalties involved with that product resulted in pressure to meet payments, and investment did not go into the business in the way they thought it would. They went from owning four leisure parks—one in my constituency and three in England —to selling them off one at a time, just to meet the bank’s demands.

Eventually, my constituent came to see me to make me aware that he was now under real pressure. I asked him whether he needed me to contact the bank, but that was the last thing he wanted. He was afraid to contact the bank and make it aware of just what a desperate plight he was in, in case it closed in on him.

[Guy Opperman]

Does the hon. Gentleman agree that the reason the FCA redress scheme needs reform is that there is no alternative? Like the hon. Gentleman’s constituents, my constituents who ran a bed and breakfast or a small and medium-sized enterprise could not go to the bank because of that fear. There is also an inability to go to law, because that would mean taking on a very large institution with deep pockets that they could not possibly hope to take on properly. The only way they can go forward is through the redress scheme, which has its deficiencies.

[Mr Brown]

I thank the hon. Gentleman for that intervention. As I continue this sorry tale, he will see that the business went into litigation on this issue.

[Steve Rotheram]

We have heard the word fear on a number of occasions in this debate. Companies such as the Flanagan Group felt fearful of what the banks might do, but fearful, too, of the reputational damage that might have occurred from an external view of the company. Does my hon. Friend think that this is an appropriate way for banks to act?

[Mr Brown]

We all believe in the role that banks have in our day-to-day lives, whether as individuals, households or businesses. We need to think there is an element of trust. What we have discovered, however, is that there has been far too much mistrust. In addition, some senior people had no idea what their banks were doing. They allowed their managers to carry on selling products, while having no idea of their complexity. One person who worked for Barclays and sold some of these products came to meet me. He was in the Penrith area and decided to come and speak to me about my constituent. He told me that on being introduced to the products, which he was about to sell to customers, he asked his seniors, “What if this or that question is asked?” He was told just to move on, because there were no answers.

The long and short of this tale is that the banks eventually moved in with a team of administrators. I approached the administrators to tell them that I thought what was going on was wrong and that if my constituent went to court he would win his case. The administrators made out that they had to carry on with the business they had been pulled in to conduct, and they went ahead with it. My constituent owed the bank £1.2 million, of which £900,000 was bank charges—an absolute disgrace. As I said to the hon. Member for Hexham (Guy Opperman), my constituent went to court and he won the case. But that matters for nothing. Gone is more than 20 years of a family working together to build a business that was going reasonably well but went badly wrong when they were encouraged to take out products that they did not really understand, and which those selling the products did not really understand either.

I want briefly to mention another, more recent, case relating to another constituent in the far west of my constituency, down in Stranraer. This is a really tragic case. People and businesses do not just have problems with the banks. There are other issues lying in hiding too and some relate to Her Majesty’s Revenue and Customs. This gentleman told me:

“For the last 6 years I have been a victim of the mis-selling of an IRHP SWAP Termed Business Loan.”

The last three years, in particular, had been very difficult. He had been fighting off the bank that had been battling with him because it would not accept that it had mis-sold him a product. I could tell from the number of occasions I met him over the last three years that this was really getting him down. It got to the stage where he had to sell off his mother’s family home of some 44 years. He had remortgaged his own home, incurred legal costs of over £8,000 and had put the family business of over 54 years standing in real jeopardy.

My constituent was eventually on the receiving end of a phone call from the bank to say that it was about to make him an offer within a two-month period, which it has now done. However, that offer of some £76,000 goes nowhere near to meeting the cost to him as a family man who had done nothing else but work morning, noon and night for such a sustained period of time that he missed his family growing up. The offer put him under real pressure. On the second last occasion he came to see me, he was seeking advice but knew in himself that he was being forced to “take it or leave it”, as I mentioned before. The advice from the bank was that this was a “full and final” offer, with no recourse to consequential losses.

Had my constituent not got involved in this loan, he would have been building up his business, but it actually suffered. He wanted to develop the business and the properties he had available for rent. All that was put on hold, however, because he was struggling to meet the bank’s regular demands. My constituent has had to go to Revenue and Customs to strike a deal, agreeing that he would pay the bulk of the VAT he owed and that between now and the end of February everything would be cleared.

[Guto Bebb]

I hope I am not being greedy in intervening, but I think it should be placed on record that the “time to pay” arrangements of HMRC have been very positive on this issue, but the consequences of the redress scheme are not as positive as expected. The “time to pay” agreements have been taken away in many cases, so there is a need for the continued support of the banks while we try to resolve the situation.

[Mr Brown]

The hon. Gentleman is absolutely right. HMRC needs to be a little more patient with our constituents and with all of us here who are trying to do what is right in standing by our constituents and making the case for them. They have come through a traumatic time and they are not out of the woods yet, so they continue to need our help. That is why I wrote to HMRC on behalf of my constituent—to offer support, saying that I was quite confident and absolutely convinced that the issue would be resolved if it would just be patient.

In conclusion, we need an appeal mechanism. Further consideration needs to be given to bringing those who were sold embedded swaps who seem to have been excluded, at least up until now, back into the system. If there is any means of acquiring someone or a small organisation that is independent of what is going on with the FCA in response to this issue, I would like to see it happen. It is right for people to get their just deserts; that is what justice means.