Guest column: Daniel Fallows – Uncovering RBS’s downgrade to GRG compensation scheme
Daniel Fallows, director at Seneca Banking, reveals an untold change to RBS’s review scheme for businesses affected by the bank’s Global Restructuring Group division.
Royal Bank of Scotland has been the subject of shame and degradation after secret files revealed that the bank’s former turnaround division, Global Restructuring Group (GRG), targeted 16,000 businesses, scooping them of their profits and stripping them of their assets.
Viable businesses were allegedly placed under GRG control and charged excessive fees to boost revenue for the bank after the onset of the financial crisis. After undergoing an independent skilled person review, it became apparent that RBS drove struggling businesses into bankruptcy, resulting in the bank shutting down the unit.
Late last year RBS announced the Complaints Review Scheme, which puts aside £400m for businesses affected by the Global Restructuring Group. This scheme has been highly criticised as it allows RBS to play ‘judge and jury’ on itself, giving it the opportunity to undercut businesses once again.
At Seneca Banking Consultants, we have recently recovered £2.75m relating to GRG losses and claimed just over £100m in total compensation for UK businesses over the last five years. We proactively advise businesses that have been affected by GRG, helping them obtain the maximum possible redress settlement, and supporting them through the entire review process.
We have recently discovered that RBS dramatically modified the terms and conditions to their Complaints Review Scheme, without notifying current applicants or any advisory parties involved. The change to the terms now reads as follows:
“If the outcome letter includes an offer, that offer will remain open for acceptance for 28 days from the date of the letter, after which, if not accepted in the meantime, it will lapse. It will also lapse immediately upon any appeal against a decision being made to the ITP (Independent third party).”
If the bank makes a partial offer of redress, the customer is faced with the dilemma of either accepting the offer or appealing the decision, which would cause the original offer to lapse.
This takes away the natural right of response that is championed by the Financial Conduct Authority. The customer is effectively forced to restart the process, with hopes that the ITP makes an award as favourable as the previous offer.
Common practise shows that the bank would either accept such a response and make an improved offer or reject the response and maintain the original award. It is also strikingly different from the Common Law practise in which the original decision remains in the event of an unsuccessful appeal.
The review process as announced by RBS is unsatisfactory as it seems RBS is, once again, trying to evade its duties in the interest of self-preservation. Businesses that have suffered at the hands of GRG deserve a process that will enable them to obtain full and fair redress in a timely manner.
RBS justified its treatment of SMEs under the control of GRG during 2008-2013, saying: “The period 2008-2013 was a very difficult time for the bank, our customers and the wider economy. There was an unprecedented increase in SMEs falling into financial distress and the number of customers managed by GRG increased by around 400%.
“As GRG adapted to the pressure of growing numbers, the bank accepts that during this period it did not always provide the level of service and understanding that it should have done.”
The leaked RBS files revealed that businesses, both viable and struggling were caused to deteriorate, and rather than nursing them back to health, the Global Restructuring Unit used them as prey.
It was announced that the ongoing FCA report on RBS racked up more than £40,000 in costs, this includes monitoring, research and appointing appropriate firms to conduct the report. The report has faced an eight-time delay, and is yet to be published.
We have addressed Andrew Bailey, chief executive of the FCA, MPs and UK SME business owners in an open letter suggesting an overhaul of the complaints review scheme. Some of the significant enhancements include:
-An alternative ITP should there be a conflict of interest
-The review period should date back to 2001
-More clarity on in-scope criteria and automatic redress fees
-Consequential loss claims should be overseen by the ITP
-The complexities of the Review and claims process should be highlighted, with advice to get specialist help.
We believe these changes should be made to the review to ensure that no businesses are negatively affected by the current state of the review. We hope that Mr Bailey can address these concerns promptly, so that all businesses affected by RBS’s turnaround division receive a fair, just and prompt outcome.