RBS mistreated clients, leaked FCA report reveals

Guardian, 25.08.17

 

A division of the taxpayer-owned RBS bank which was meant to help companies in trouble mistreated many of its clients but did not try to “profit from their distress”, according to a leaked report by the regulator, the Financial Conduct Authority.

 

According to the report, seen by the BBC, investigators found “inappropriate action” by Global Restructuring Group (GRG) was experienced by 92% of “viable firms” they dealt with. This included increasing interest rates and charges and imposing unnecessary fees on many of its clients, whose numbers peaked at 16,000.

 

The GRG unit, which operated between 2005 and its closure in 2013, stepped in when companies which banked with RBS experienced financial difficulties. GRG, which was marketed by RBS as a turnaround specialist, has been accused of pushing some companies into bankruptcy so it could pick up their assets more cheaply.

 

The leaked report found that struggling companies had a small chance of re-emerging in a healthy state, with only one in 10 returning intact to the main RBS bank. Almost seven out of 10 firms in turnaround remained tied to complex loans organised by the GRG which were often too expensive to leave. Other companies handled by the GRG ended up in administration, liquidation or sold. GRG was more like an “undertaker” than a recovery specialist, according to one BBC source.

 

RBS provided only limited cooperation with the FCA inquiry it was claimed, although the bank said on Friday night that it cooperated fully.

 

The FCA provided a summary of the findings last year but the full report calls for a fundamental review of how RBS handles small business customers in financial distress.

 

RBS is facing scores of legal actions by former customers and has put aside almost £400m to compensate some of the small business owners alleged to have suffered at the hands of GRG but some campaigners claim that compensation payments could be closer to £2bn.

 

An FCA spokesman said many of the activities carried out by GRG were largely unregulated and its powers were therefore limited. The spokesman said the regulator “was investigating issues raised by the report which fall within our remit.” The FCA would publish a full account of the issues contained in the report once the investigation was complete, he said.

 

An RBS spokesman said it had already acknowledged that “in some areas, in the aftermath of the financial crisis, we could have done better for some customers in GRG … the bank accepts it did not always communicate as well or as clearly as it should have done and also did not always handle customer complaints well.” It said it had taken appropriate FCA-approved measures to rectify the failings including a new complaints procedure and the automatic refund of complex fees paid by customers.

 

RBS sources said the FCA had already made clear that in a “significant majority of cases” it was unlikely that the actions of RBS “did not result in material financial distress to the customers it looked at”.

 

The bank, which is 73% owned by the state, claims the report used a “very broad” definition of inappropriate treatment but still found GRG actions had a very limited impact on customers.

 

Earlier this week, it reached an out-of-court settlement with businessman Stuart Wall who alleged his property company was forced into bankruptcy after involvement with the GRG. He was suing RBS for between £114m and £669m.

 

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