Mortgage Prisoners

Jim Shannon Excerpts

Thursday 6th June 2019 Commons Chamber

[Jim Shannon (Strangford) (DUP)]

It is always a pleasure to speak in these debates on the banks, and I have spoken in every one. I am sure that my constituents are more than glad to know that, on banking issues, I am here to bring their cases to the attention of Ministers. The Minister has always been responsive to my queries and questions on behalf of my constituents, and I look forward to his response not just to me but to everyone else. That is why we are here.

I congratulate the hon. Members for Dover (Charlie Elphicke) and for East Lothian (Martin Whitfield) on securing this debate. They have been engaging on this subject, and they and the Treasury Committee are to be congratulated on sustaining their interest and effort here. We all appreciate their considerable efforts on behalf of all our constituents across the whole United Kingdom of Great Britain and Northern Ireland. I believe that the solution requires a collective and collaborative effort by the regulators, Parliament and the Government. As others have, I call on the Government and the regulators to hold an urgent inquiry into the sale of debt to unregulated entities.

It is a pleasure to follow the hon. Member for Sutton and Cheam (Paul Scully). He makes a valuable contribution to every debate he speaks in, but his contribution to this debate is especially valuable. It is always a special privilege to follow him. A number of Members have spoken on behalf of the mortgage prisoners, and I add my and my party’s support to the House’s calls for Her Majesty’s Treasury and the FCA to redouble their efforts to address this serious subject properly.

I will mostly speak about the sale of debt by banks, through private equity investors, to third-party funds such as those described as vulture funds. Put simply, these banks generally made judgments to lend and then decided to change their business strategy—every Member who has spoken has given such examples—away from these customers whom they had previously regarded as credit-worthy, often for 10 to 15-year loans. They were often happy to make supernormal profits or bonuses, and then abandon their customers through a form of grooming process, turning these long-term loans into on-demand overdraft facilities; they were basically screwing these people as much as they could. It seems obvious that private equity can make the returns they want only through buying or collecting the debt through substantive write-downs of debt and/or at the expense of those customers who trusted their bank—and they do trust their banks, or at least they used to. They do not trust them any longer. From what I have seen, these former customers are the real losers. The hon. Member for East Lothian estimated that there are some 400 of these customers per constituency, and I know some of the ones in my constituency and am well aware of the problems they have had in trying to get beyond where the banks and the companies that took on their overdrafts and mortgages were.

From the Minister’s response to an urgent question in March 2019 about the hunger striker in Scotland, it seems that some lending bank standards are now in place. However, the evidence we have looked at suggests that the banks have little or no control in respect of, or interest in, those customers once there has been a sale to a third party; it seems that they are impotent, or unable or unwilling to help. As the House and the Minister know, we in the Democratic Unionist party have taken an active interest in pressing for the banks to bring forward a dispute resolution scheme—DRS—for historical banking cases. We are keen to have those matters addressed. To my knowledge, none of the seven participating banks in the current UK finance scheme believes that cases sold on to third party vulture funds are eligible for the past or future DRS. What is the Minister’s understanding about this specific area in relation to, first, eligibility and, secondly, any retroactivity in relation to the lending standards he mentioned in March?

After the Minister’s remarks then, I wrote to Richard Donnan, head of Ulster bank, which is RBS in Northern Ireland and our state-owned bank, saying:

“Secondly I enclose a part of the Urgent Question information from Hansard in relation to a moratorium for current cases from Cerberus whilst the DRS scheme comes in to effect.

Can I have your confirmation that the Ulster (and indeed RBS) are ensuring that Cerberus are staying all legal proceedings (such as those within project Aran?) as set in that exchange with the EST. ”

I left my office on Monday night to come here, but on Tuesday my constituency office received a call from Mr Donnan’s office in response to my original letter to him back in March/April. I look forward to his written reply, especially as the bank is largely owned by us as taxpayers. It is always good to remind the banks that the taxpayers—we in this House and everyone else across the nation—are ultimately the people they should be responsive to.

In particular, we have been watching and involved in how the Clydesdale and Yorkshire bank, which was formerly owned by National Australia Bank—it also owned the Northern bank in Northern Ireland, now Danske, until 2004—has been addressing the mediation/remediation efforts on a number of cases involving Cerberus. From my most recent briefing, it seems that those mediation efforts in working with the victims group CYBGCSG, and CYBG top management on 14 cases have been futile, as there appears to have been no active follow-up process. We have asked for the process and it seems that they have not got off their backsides—it is disgraceful that they have not done so. I understand that our involvement in those informal mediation efforts will lapse imminently, as I have learned that in addition to the legal claim filed by RGL Management last month, an additional legal group claim will be filed for an initial 50-plus cases centred on the CYBGCSG victims group this month. It is unfortunate that no resolution was found to any of those 14 cases, with further peaceful yellow vest protests and potentially hunger strikes across the country now seemingly inevitable.

I will, however, provide some potentially good news, as it is always good to give a bit of good news in a debate that can save us from a bit of doom and gloom. The Minister may recall that I first raised the Danske bank case of the Armstrongs a year ago. He knows about this because I have written to him about it, and he has seen the case paper with the all-party group on fair business banking and finance analysis. I understand that following their yellow vest protests from December 2018 to April 2019 at Danske banks in Northern Ireland and at Danske bank Northern Ireland-sponsored events, and with the upcoming DRS, the bank solicitors have now asked to engage with them. It has taken a long time, but hallelujah for that! At least they are answering and some correspondence is now taking place. I hope and pray that this proves to be a useful process with a positive conclusion, and that my constituents, the Armstrongs, do not feel that they need to resume their peaceful “yellow vest” protest from July, with the attendant publicity, at a time when Danske bank just happens to have won the top award in Northern Ireland this week, as a responsible company.

Following correspondence, I am aware that other banks, such as Santander, have agreed to look into some cases prior to the DRS process for SME Alliance members, and that is to be commended. As a party, in the past year we have raised in the House two other cases in which Danske opposed the Financial Ombudsman Service’s considering the complaints on a time-bar basis. Danske can quite easily allow the FOS to consider those complaints now, as I understand that those customers are willing to have their complaints considered by the new FOS team, which was effective from April 2019.

I hope that Danske and the other participating banks will collectively allow those 396 and 447 complaints from 2008 to November 2018, from across the United Kingdom of Great Britain and Northern Ireland, to be considered by the FOS, as part of the overall recognition of the need to deal with historical complaints, which it is important we do, and that the Minister will today add his support for their inclusion in the FOS or DRS processes, as a matter of fairness and equality across the historical scheme from January 2000. I understand that both the DRS chair, Lewis Shand Smith, and Mr Andrew Bailey at the FCA believe that to be appropriate, and I know that the matter was raised earlier this week with UK Finance, so there is endorsement and support from very responsible people. Hopefully, a positive response is imminent from all the stakeholders and participating banks.

Finally, the subject of third-party debt is not solely a UK matter; in our neighbouring jurisdiction, the Republic of Ireland, there was a debate on a private Member’s Bill on vulture funds in the Dáil on 28 May, and the Republic of Ireland Parliament also took useful evidence on accounting and auditing in a Select Committee in the same week. Perhaps the Minister can look into what happened there.

I finish by supporting the motion, and call on Her Majesty’s Treasury and the FCA to follow up with a proper inquiry on debt transfer to third parties and to actively consider changes to the law and regulation in this crucial policy area. Most mortgage prisoners and SMEs deserve better from us all. I thank every Member for their contribution and look forward to the Minister’s response.