Lloyds, HBOS and the Cranston Review

Alison Thewliss Excerpts

Tuesday 4th February 2020 Westminster Hall

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I pay tribute to the hon. Member for Thirsk and Malton (Kevin Hollinrake) for his diligence and for his role in the all-party parliamentary group on fair business banking, and for bringing yet another debate. I also pay tribute to Heather Buchanan for her diligent work behind the scenes.

If this process has taught us anything, it is that we need urgently to look at reforming the banking system into an ethical model that works for customers, whether they are private individuals or businesses, because this scandal has evaded every safeguard that ought to protect customers. As the hon. Member for Strangford (Jim Shannon) said in hope, there should now be a positive influence on the behaviour and attitude in banks, but an awful lot still needs to change. As he also mentioned, this is much bigger than only Lloyds and HBOS, and we need to look more widely at the issue.

Customers were defrauded of millions of pounds, and there was nothing short of a corporate strategy within Lloyds to cover that up. There is evidence that the bank’s own compliance officers were involved in the cover-up. The scandal was not uncovered by a regulator but by whistleblowers such as Sally Masterton, who was treated appallingly by Lloyds—as the hon. Member for Thirsk and Malton laid out—and put on enforced leave for her part in bringing the issue to light. She was even prevented from working with the police to bring about an end to the scandal. If we cannot rely on whistleblowers to be supported through this process, we have a serious problem. The hon. Gentleman also mentioned the Turners, and we should pay tribute to them for their 10-year battle through this as well. It should not take 10 years for people to get a reasonable response and to get justice when they have been wronged.

The independent Griggs review was supposed to deliver compensation to the victims, but this too fell short of expectations. The role of the independent reviewer was to oversee cases to ensure that they were fair. However, customers criticised the process, owing to the unaccountability of the reviewer, who would often fail to disclose what information had been provided to them from the bank. Some described it as corrupt, and many have reported it as being a thoroughly awful experience. Cranston himself described the banks as confrontational and, at times, forceful, which is completely inappropriate, regardless of the situation. Customers had no way of knowing what was fair or of seeing the working behind it. As the hon. Member for Thirsk and Malton mentioned, there is an inherent power imbalance within this, with people having to go to court and pursue this over many years, which many could not afford to do.

I know that Members across the House will be grateful for Sir Ross Cranston’s diligent work in his review of this fiasco, and we thank him for that. Particularly welcome is his recommendation that customers should be released from egregious settlement agreements, which many customers agreed to as they were offered on a take-it-or-leave-it basis by the bank; customers often felt that they had no other choice.

Sir Ross Cranston also recommends that the bank must arrange for the reassessment of direct and consequential losses by an independent body. In his report, he says that

“this part of the Customer Review, both in structure and in implementation, was neither fair nor reasonable… Other inconsistencies also resulted in unfairness… The general failure to communicate in a sufficiently clear and transparent way caused confusion”.

The bank did not make a single redress payment for direct and consequential losses to any business individual affected by the scandal. This could cover such damage as loss of opportunity, loss of profits, reputational damage, and claims for the impact of the scandal on a customer’s personal life. Given the time period over which this took place, it is clear this could have had a huge impact on the lives of the victims of this scandal.

It is unfortunate that banks cannot always be relied on to act in the best interest of their customers without adequate enforcement of the rules. We cannot allow them to mark their own homework. I urge the Minister to investigate the possibility of creating a permanent commercial financial dispute resolution platform, which would allow a streamlined process for consumers to hold banks to account and go some way towards alleviating the suffering of victims of mis-selling.

Although there is no doubt that some individuals went to great efforts to bring justice to the victims of this scandal, there is still no straightforward recommendation for redress for customers, for them to achieve the fairness and justice they deserve. We have seen people lose their businesses and livelihoods before any justice was served. People such as those mentioned by the hon. Member for Strangford, who have suffered through ill health or who have aged in the intervening years, need to see that soon. For many people, those opportunities may be lost forever. The Treasury must act to ensure that a scandal of this magnitude cannot happen again. The legacy of this saga must be change across the board.

My hon. Friend the Member for East Renfrewshire (Kirsten Oswald) mentioned Clydesdale and Virgin Money. We know other issues are brewing out there. I ask the Minister to take those into account. Again, I thank Sir Ross Cranston for his report, and the significant pressure for change, which leaves it to us and the UK Government to act.