Many readers of our blog will be aware of the FCA review process for the mis-selling of interest rate hedging products.
Those familiar with the scheme will know that bank customers who may have been mis-sold hedging products are invited to make submissions to their respective bank’s review team. These submissions are considered by the review team together with any evidence the customer may have supporting their claim before a decision is made and then passed on to the independent reviewer (usually a firm of accountants or solicitors appointed by the bank) for approval and subsequent issue to the customer.
The scheme has been marred with difficulties. In particular the flow of information through the scheme is strictly one way. The customer never actually gets to see the real basis for the bank’s decision.
One of the many frustrations with dealing with this process is that whilst the bank will consider customer submissions and evidence, the bank and its independent reviewer will also consider documents held on the customer’s central file. These documents are not made available to the customer.
While the customer can take steps to try and recover documents from their file by way of subject access requests under the Data Protection Act such requests often result in limited and partial documentation being disclosed to the customer.
The result is that decisions are often made by the bank’s review team and then approved by the independent reviewer on the basis of facts and documentation not known and not disclosed to the customer including internal emails, meeting and call notes.
Back in September it was reported that an RBS customer, Mr Keats, a former Metropolitan Police Sergeant was able to recover some documents from RBS relative to a complaint he had against the bank. The contents of these documents, which came from his company’s central file, differed from the versions of the document he held as part of his own records. Mr Keats reported this to the Information Commissioner and to the Financial Conduct Authority. Mr Keats view was that these documents had been deliberately amended by the bank in order to sway the decision making process relative to his complaint.
The Story Breaks
On 4 November a story broke in The Times regarding this very issue. It has been alleged that RBS has been using “secret” and doctored documents as part of its decision making process when deciding whether customers should receive redress . These documents were not provided to customers but were provided to the independent reviewers who oversaw redress payments. These documents apparently include misleading bank sales literature and allegedly bogus emails.
Other customers of the bank allege that RBS produced records of meetings which never took place. In response to these accusations, RBS said that these disputed documents did not determine the review outcomes. Furthermore RBS categorically denied falsifying customer records to influence the outcome of the review process.
These accusations become ever more worrying in cases where RBS apparently provided the independent reviewer with completely different records of meetings than those held by the client’s themselves. In a case dealt with by MBM the bank’s account of a treasury meeting (disclosed via a subject access request) differs wildly from account recorded in the customer’s own handwritten meeting notes which were produced at the time.
The treasury select committee has called on the FCA to examine these cases and the FCA has responded that they will look closely at all allegations. Guto Bebb MP, a Member of Parliament instrumental in the creation of the FCA review process said “this information calls into question the whole nature of the FCA review scheme, which is clearly based on trust as the Banks were allowed to carry out the review processes themselves.”
It is difficult to tell where this will go next. Clearly the FCA has been called in to investigate and we would expect that in certain circumstances some reviews will have to be carried out again. That said, the majority of customers will be unaware of what evidence was used when determinations were made by the review teams and the independent reviewers.
The only way to effectively get to the bottom of this would be for a complete overhaul of the review process. How this would work in practice is difficult to say given that the review is supposed to be coming to an end.
This is clearly going to be a fast moving and interesting area and we will be watching it closely.