Hidden Credit Liabilities: Role of the FCA

Andy McDonald Excerpts

Tuesday 14th April 2026 Westminster Hall

[Andy McDonald (Middlesbrough and Thornaby East) (Lab)]

It is a pleasure to serve under your chairship, Sir Roger. I thank my right hon. Friend the Member for Hayes and Harlington (John McDonnell) for securing the debate, for his expert exposition and for the work he has done on this issue over many years.

I will raise case of my constituency neighbour, my right hon. Friend the Member for Redcar (Anna Turley), as she is unable to do because of her Front-Bench position. The case concerns the retired couple Stephen and Gloria Lilley. Their family home, their son’s home and Stephen’s investment portfolio were all tied up as collateral for a commercial loan, without their knowledge or agreement, to provide security for the hidden credit liability on a swap the bank insisted they take out.

Mr and Mrs Lilley had paid off their mortgage and were looking forward to a peaceful retirement but, instead, HSBC persuaded them to raise £455,000 of commercial borrowing, secured first on their business premises. When there was not enough equity in the business premises to cover the undisclosed initial commission—internally classed as “added value”—and the hidden credit liabilities on the swap, the bank required their family home, their son’s home and Stephen’s share portfolio to be used as additional collateral: a total of £960,000.

The first charge on Stephen and Gloria’s home created a regulated mortgage contract under the FSA’s mortgage conduct of business rules. The bank was required to give clear explanations of all risks, including all-moneys charges and contingent liabilities, but despite repeated requests from their adviser for full disclosure of the credit line and the size of the liability, which was needed for consequential loss calculations, HSBC refused to provide the information. Its response was particularly blunt:

“With regard to the rest of the other queries raised…they are not pertinent to the review methodology nor the redress outcome.”

As personal guarantors, Mr and Mrs Lilley had an absolute right to know the full extent of the bank liabilities and risks they were personally guaranteeing. Had the credit line risk and the undisclosed up-front commission been properly disclosed, the resulting losses and damage to the business would have been entirely foreseeable. Yet the FCA, working in agreement with the banks, deliberately designed the sales standards used in the interest rate hedging products review to exclude any consideration of that damage or harm when assessing consequential losses, as the BankConfidential report confirms.

The stress was devastating. Both Stephen and Gloria have suffered heart attacks in recent years, which were directly linked to the financial worry caused by the mis-sale. Speaking in the House in December 2016, my right hon. Friend the Member for Redcar described how the couple had endured sleepless nights and felt powerless as the bank held their retirement security in its hands. When HSBC later admitted that the product had been mis-sold, it offered only a limited swap-for-swap redress, providing an alternative cap product that still left the Lilleys substantially under-compensated. In fact, they received no consequential losses at all—just interest on what was classed as overpayments on the product. How can a product that destroyed a family’s business and lives for over a decade lead to no recognised loss?

Across the entire IRHP review, the banks paid out £2.2 billion in total redress for around 20,000 acknowledged mis-sales. Yet only £46 million—just 2%—was paid for consequential losses, even though most victims ended up facing insolvency and personal bankruptcy. That was no accident: the non-disclosure of the hidden credit line risk was deliberately kept out of the review methodology so that the devastating downstream harm could be totally ignored. This is another textbook example of why there must now be a fully independent investigation, completely outside the control or oversight of the FCA, into all forms of hidden credit liabilities across every bank, and why a fair redress scheme must be established for every business and family ruined by this practice. No couple should have their family home put at risk or endure years of severe stress and ill health simply because a bank failed to disclose the true risks and costs of the products it sold them.

I am sure that my right hon. Friend the Member for Redcar can make all the correspondence—including letters demanding explanations on the regulated status of the home loan and the hidden credit line—available to the Minister and her team, in the hope that they may be of assistance to her in considering what remedial actions may be considered. Hopefully, the catalogue of gangster-like behaviours perpetrated by these banks can finally persuade the Minister and her colleagues to launch an independent, judge-led inquiry into an utter scandal that has bedevilled far too many businesses for far too long.