Similarly we'd welcome any comments or views from SMEs.
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.