Financial Conduct Authority Redress Scheme

Debate between Steve Rotheram and Cathy Jamieson

Thursday 4th December 2014 Commons Chamber

[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.

[Steve Rotheram]

Will my hon. Friend give way?

[Cathy Jamieson]

I apologise, but I am at the limit of my time.

Will the Minister please address the lack of an appeal process? Will she address tax treatment by HMRC and look at having a review of compensation levels? I look forward to hearing what she has to say.

Thalidomide Victims

Debate between Steve Rotheram and Cathy Jamieson

Wednesday 5th September 2012 Westminster Hall

[Cathy Jamieson]

My hon. Friend makes an important point that goes to the nub of the matter. The evaluation report shows that the pilot scheme had an important impact that was significant to the lives of individuals because it allowed them to retain or obtain more independence, and that it was cost-effective to the NHS and other social services.

Some people who are affected by thalidomide receive disability living allowance, which provides a proportion of the special costs, but there is worry that many will lose the mobility component of DLA when the system changes to personal independence payments. I suspect that we could spend another half an hour on that topic, but I wanted to put it on record.

[Steve Rotheram (Liverpool, Walton) (Lab)]

I am 50, having been born in 1961, and so is my cousin. My mum did not take thalidomide, but my cousin’s mum did. My cousin is a thalidomider, and she has lived a fantastic and active life. A friend of mine, Gary Skyner, whom many people here will know, is a Liverpool comedian, and has also lived an active and full life—he is a very funny lad. Both have relied on family support, but that will not always be there for them. I am sure that my hon. Friend agrees that all thalidomiders are asking for is a just settlement so that they can continue to live full and active lives.

[Cathy Jamieson]

The issue of justice is important, and it involves not just the health grant, although that is important, but compensation and other issues that are being pursued elsewhere.