Those people affected by RBS GRG will no doubt be interested in this article from Cat MacLean which she has has kindly shared with us. I spoke to Cat this morning and we are in agreement that in all probability the majority of those businesses affected will not be entitled to take part in the scheme. If anyone at RBS or the FCA who have approved this scheme knows differently, we'd be grateful if they'd enlighten us.
Similarly we'd welcome any comments or views from SMEs.
RBS launches “compensation scheme” for customers who survived GRG.
In a perfect illustration of the maxim “pick a good day to bury bad news”, on the day of the US Presidential Election, RBS issued a press release announcing a new complaints process, to be overseen by an independent third party in the form of a of a retired High Court judge, Sir William Blackburne, and an automatic refund of certain fees paid by SME customers in the bank’s Global Restructuring Group (“GRG”) between 2008 and 2013. Unsurprisingly, given the events unfolding in the US that day, the announcement attracted little attention, other than within the SME community, who had been eagerly awaiting such an announcement for many months; most however were disappointed in the content.
The press release reiterated its previous acknowledgement that “in some areas it could have done better for SME customers in GRG” – an admission that many businesses may feel is a spectacular understatement, particularly given the accompanying assertion that “in a significant majority of cases, it was likely that RBS’ actions did not result in material financial distress to these customers”. The release also went on to stress that “it is important to remember that the period in question, between 2008 and 2013, was a very challenging time for the bank and its customers.” The bank itself admitted that the number moving into GRG from 2008 onwards increased by around 400%. No figures were provided by RBS in relation to the number of companies who did not survive GRG, and who were placed in an insolvency process, but some estimate the % of businesses who failed whilst within GRG to be over 90%. Against this background, the apology issued by Ross McEwen that “I am very sorry that we did not provide the level of service and understanding we should have done” may ring hollow for some.
So who will be eligible to take part in the scheme? Sadly, for the many businesses who failed whilst in GRG, and who were placed in an insolvency process, the right to advance a claim is denied the directors of those businesses, and instead rests with the administrator or liquidator of the business. If a liquidator chooses to participate in the scheme, any compensation will be distributed to the creditors of the company. It has been suggested that the scheme is akin to a hospital trust, having suffered a major outbreak of an infectious disease such as C Difficile resulting in the deaths of hundreds of its patients, announcing a compensation scheme only to the few patients who were lucky enough to survive the outbreak.
There is another form of exclusion hidden within the detail of the FAQs. The review process is said not to be “appropriate” for complaints that have previously been the subject of a decision by the Financial Ombudsman Service (FOS) – even though such a decision would have been made on the basis of robust assertions at the time by RBS in relation to their conduct in respect of the customer which, standing Ross McEwen’s apology, the bank no longer appears to maintain. There has been a significant sea-change in RBS’ acceptance that it has not served its SME customers well, but despite this, any FOS decision, even if made on flawed and now recanted information from RBS, will still stand.
There is more. The announcement goes on to narrate that “it also may not be appropriate to consider complaints from customers in on-going litigation against the bank or who have threatened litigation in formal Letters Before Claim unless the customer and RBS agree to stay those proceedings while the complaint is being considered”. This seems to suggest that where proceedings are raised to prevent a claim time-barring (more common in Scotland perhaps than in England, where Standstill Agreements are not used, and proceedings often raised to “stop the clock”, but not progressed until the year and a day period is close to expiring) it may be open to RBS to exercise their discretion not to permit that customer to participate in the scheme. The customer then faces an impossible decision: to forgo altogether the right to litigate in the hope that the complaints process will deliver justice; or forgo the right to participate in the scheme in favour of a lengthy and very expensive court case against an opponent with bottomless pockets.
So what exactly will the scheme consist of? For certain charges imposed upon customers, it is said that there will an automatic repayment of these fees. These are listed in the detail of the FAQs attached to the press release, and include management or monitoring fees, asset sale fees, exit fees, mezzanine fees, ratchet fees, risk fees, and late management information fees. Fees relating to property participation fee agreements and equity participation agreements are also included, but facility fees, even if these were imposed every few months where borrowing was extended for short repeat periods, are excluded, as are interest charges, even where customers were charged default interest of 29%, and margin increases. The bank has also specifically reserved the right to apply “set-off” of fees which might otherwise be repaid against amounts which may be currently outstanding in any loan or overdraft.
In addition to the refund of fees, customers may also complain about their treatment in GRG between 2008 and 2013. The complaint will be considered by a “specialist team” with Sir William Blackburne adopting an appeal role as part of the process. The bank said “this adds a more robust and independent step to the complaints process to deliver fair outcomes should SME customers who were in GRG wish to complain about their treatment”.
In summary, the scheme announced by RBS appears to be very much the bare minimum that the bank were permitted to get away with. The announcement was preceded by months of talks with the FCA and it is clear that the bank has pushed hard for the right to retain a significant degree of control over the process; to limit the scope of the scheme; to exclude those businesses pushed into insolvency as a result of being in GRG; and to exclude the many many businesses who made complaints to FOS which were not upheld because of the robust denials presented at the time by RBS. It will be interesting to see whether and to what extent the scheme will form part of a forthcoming debate in the main chamber of Parliament, due to be heard before Christmas, on “access to justice”: it seems that whilst some RBS customers may now have a route to justice, many will still be excluded.
One of our members, Jim McGrory has asked us to share this comment which
will be of particular interest to victims of Clydedale.
For further information please contact:
CLYDESDALE BANK REFINANCING PRACTICES
Date tabled: 26.10.2016
Primary sponsor: Gethins, Stephen
Sponsors: Hosie, Stewart Kerevan, George Blackford, Ian Day, Martyn
That this House notes the June 2012 findings of the Financial Services
Authority (FSA) that there were serious failings in the sale of interest
rate hedging products to some small and medium-sized businesses by
Clydesdale Bank; further notes the earlier critical findings of the
Treasury Select Committee that the voluntary redress procedures
implemented by Clydesdale Bank were inadequate; regrets that the
subsequent behaviour of the bank has done nothing to date to improve
customer confidence in this system of redress; criticises the bank for
being less than fully transparent about the costs, penalties,
obligations and calculations attached to its break clauses; notes that
the bank has failed repeatedly in the redress process to give details of
so-called third party hedges that triggered excessive financial
penalties for clients; encourages the bank and its representatives to
provide more accurate and consistent information, such as terms and
conditions to its customers when they inquire about their personal
finances; further encourages the FCA regulator to re-examine the
voluntary redress scheme and ensure Clydesdale Bank's customers have
been fairly treated.
Press release 3rd November 2016 SME Alliance – A Step Forward In The Battle For Access To Justice
Of all the goals SME Alliance and its members have had over the last two years, the most important has been to try and re-establish 'Access To Justice' and an equitable playing field for SMEs abused by financial institutions. A decrease in legal aid, spiralling court costs and prohibitive legal fees for small business owners versus banks with deep pockets has left many feeling they have been priced out of the justice system.
The recent expose by the BBC and BuzzFeed evidencing what was happening in RBS GRG and recent revelations from the criminal trial regarding events originating at HBOS Reading, have brought to the fore, yet again, how misconduct in the financial sector is damaging SMEs, the communities who rely on them for jobs and the economy. Many of our members have been victims of so called 'business support units'. More still have been damaged by the deliberate mis-selling of unethical financial products. SMEs have been fighting a steep uphill battle and SME Alliance was formed primarily to support business owners in these positions and to lobby for change.
To this end we have been working with George Kerevan MP and his team on the APPG for Fair Business Banking. The APPG very recently tabled a draft motion calling for the creation of a sustainable platform for commercial financial dispute resolution:
That this house notes the statements presented to the Treasury Select Committee on 20 July 2016 by Dr Andrew Bailey of the FCA; endorses his statement that the ad hoc creation of a compensation scheme within the FCA was not entirely successful and lacked perceived authority to treat customers with fair outcomes; believes that the recent headlines and allegations in the press against RBS will lead to pressure for a similar scheme; notes that many debates in this house over the years have focused on similar subjects with different lenders; believes that we must create not ad hoc compensation schemes, but a long term, effective and timely dispute resolution mechanism for both regulated and unregulated financial contracts; and calls on the FCA, BEIS and the MoJ to work with the APPG on Fair Business Banking to create sustainable platform for commercial financial dispute resolution.
We are happy to announce it was confirmed on Tuesday 1st November the Debate will happen between the 24th November and 14th December 2016.
We'd like to thank George Kerevan MP, Calum Kerr MP and their team for tabling the motion as well as the many MPs who supported it. We'd also like to thank Heather Buchanan and her team who have worked hard to make this happen. And, of course, our own members who have actively canvassed support from their MPs.
While we know this Debate will not bring about overnight solutions to the many conflicts between the financial sector and the SME sector, it is a real step forward in the right direction. It has started with this acknowledgement in Parliament there is a very serious issue to be resolved in the interests of the many SMEs damaged by unethical and, in some cases, criminal conduct in banks. This is not about a specific mis-sold product - it's about the bigger picture that has long been concealed from the Court of Public Opinion. Neither is this yet another seemingly good opportunity that will end up watered down by the interests of the financial sector and its supporters. Many lessons have been learned since the FCA IRHP Redress Scheme.
After many years of stalemate for some SME Alliance members, we are looking forward to the debate and will give it our full support.
3rd November 2016
For further info: e-mail email@example.com or contact Nikki on 07519 505276 or 01223 779690.
All our members are encouraged to contribute to the SME Alliance weekly blog.