A cross section of MPs are fighting for a financial services tribunal that would bring misbehaving banks to justice, ahead of a key meeting with the chancellor this week. Tory MP and co-chair of the all party parliamentary group (APPG) on fair business banking, Kevin Hollinrake, is expected to meet Philip Hammond to exert more pressure on behalf of small business customers who say they have been wronged by UK lenders. Hollinrake presented proposals last week by submitting a letter of support for the tribunal.
Hollinrake is set to push for two systems of redress, including a compensation scheme for business customers who were victims of the HBOS Reading fraud and Royal Bank of Scotland’s global restructuring group, as well as the mis-selling of interest rate hedging products. The second will centre on the creation of the financial services tribunal which will ensure SME customers’ complaints receive a hearing in future disputes with British banks.
Business lending is still not regulated in the UK, an anomaly which has left victims without protection from the Financial Conduct Authority, the City regulator. The meeting between Hollinrake and Hammond comes weeks after the chancellor set a deadline in his autumn budget for the banking industry to respond to recommendations for a voluntary dispute resolution process by the end of November.
Hollinrake’s proposals are gaining momentum, having secured a letter of support from the chairman of challenger bank TSB Richard Meddings. He is the first to pen a reply to the APPG’s industry-wide call for backing for the proposed tribunal system in letter sent to UK banking bosses last week.
Meddings said “more needs to be done” for small business customers in dispute with their lenders. “TSB is proud to have been the first bank to back the APPG’s campaign for a financial services tribunal and we hope that others in the industry will follow,” Meddings said, putting TSB among groups including the influential Treasury select committee which has also backed a tribunal.
Banks such as Lloyds and RBS have been more hesitant to give full-fledged backing to the APPG’s vision. Lloyds Banking Group has instead thrown support behind the FCA’s planned extension of powers for the Financial Ombudsman Service to cover business banking customer complaints. The ombudsman service has been thrown into controversy after a Channel 4 Dispatches investigation suggested some consumer cases may have been been mishandled by inexperienced staff. The Treasury select committee chair, Nicky Morgan, has called the ombudsman “under-prepared and under-resourced,” and said rushing through a proposal to extend its powers would “yield little benefit.”
TSB’s chairman said in his letter that he welcomed an extension to the ombudsman’s powers, but stressed it was important that small businesses “are given an alternative dispute resolution mechanism with which to challenge their bank over unfair lending or treatment practices”. There is also the issue that maximum compensation from the ombudsman would be capped at £350,000 despite many victims claiming damages in the millions. “We remain open minded about how more complex cases might be resolved in the future,” Lloyds said in a statement.
RBS has also been cautious in giving wholesale support to a tribunal, suggesting in a submission to the Treasury select committee that a tribunal would be unlikely to provide any different outcomes than a court. However, some SME banking victims say costs are a barrier to pursuing justice through the courts system. “It is essential that SMEs have access to dispute resolution options that they can have confidence in and which can be relied upon to deliver inexpensive, unbiased and prompt decisions,” RBS said in a statement.