As the Royal Bank of Scotland (RBS) admits its turnaround division failed small business customers, the Federation of Small Businesses (FSB) has called for full publication of the investigation.
The bank’s Global Restructuring Group (GRG), which closed in 2013, has been under investigation by the Financial Conduct Authority (FCA) after allegations emerged that small businesses were deliberately led into disrepair.
With the report yet to be published in full, both its author and RBS have confirmed the bank’s failings.
Addressing the Treasury select committee, Tony Boorman, head of Promontory, the financial group which undertook the RBS investigation, told MPs that the division placed its customers “on a pathway to insolvency”, and reiterated his call for the report to be published.
Later, the bank’s chief executive, Ross McEwan, admitted RBS “did not do a good job with these customers and the report shows that”.
Responding to the committee hearing, Mike Cherry, FSB chairman, said customers now deserved to see the full findings of the RBS investigation.
“Three-and-a-half years on from the commissioning of Promontory’s GRG report and we’re still yet to see its findings in full, despite the author’s recommendation that they should be published,” he said.
“It’s time that those small business owners who had their lives destroyed by GRG finally had the truth about who knew what. After ten years, it’s the least they deserve.”
A leaked copy of the report confirmed staff were told to “let customers hang themselves”, with 92 per cent of customers encountering “inappropriate action”. Memos were also leaked, revealing staff were encouraged to put greater pressure on customers to accept higher interest rates.
“RBS later came after our property, and we had to find £40,000 to stop them getting it.”
One small business owner brought into the GRG, who wished to remain anonymous, got in touch with Business Advice to highlight the reality of the division’s practices.
“At the time of all this I ran a small engineering company and RBS forced us into ‘factoring’, removing our overdraft facility while knowing it had full security on our property, which lead to the tail wagging the dog. We were advised our interest charges would be reduced by 75 per cent, but they in fact increased by 75 per cent.”
The business was soon forced into insolvency, and the company’s premises came under threat.
“RBS later came after our property and we had to find £40,000 to stop them getting it. the original debt which was mainly built up of interest and factoring charges was only £30,000 at the time.
“I of course do not have the resources to take on RBS on my own, so at this point in time RBS has won.”
Cherry added: “The question now is how do we prevent another GRG in future? With that in mind, we’ll be responding to the FCA’s consultation on the Financial Ombudsman in the coming weeks.
“Given that the FCA is not recommending an extension of regulation to small business lending, increasing the Ombudsman award limit or providing access to its redress system for firms that have gone into liquidation, it’s hard to see how its proposals would protect victims of a future GRG-type scenario.
“The whole FCA framework is underpinned by this idea that small business owners have considerably more financial expertise than the average consumer. The regulator needs to understand that small firms are far more like consumers than big corporations. They don’t have financial expertise on tap and, as GRG has tragically shown, they need real protections in this space.”
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