Debt charity warned future in doubt after RBS uses stalling tactics to major mis-selling claim

 

Personal Finance Editor

A debt charity has warned its future is in doubt after the Royal Bank of Scotland used stalling tactics to avoid sorting out a major mis-selling claim.

Derby-based Direct Help and Advice has accused RBS of costing it at least £150,000 by mis-selling an interest rate hedging product to support its mortgage loans around five years ago.

The charity - which helps people at risk of being made homeless - had its mis-selling claim hearing in August 2013, but is still waiting for a decision.

Five months on, the situation has led the charity to warn it may have to shut down some of its services or close altogether, putting its 40 staff out of work.

Derby North MP Chris Williamson weighed into the dispute this week by saying it was a "travesty that Direct Help and Advice has been forced into this position".

"Derby people are suffering while RBS kicks its heels," he said.

The charity has written several times to the bank to try and find out when a decision will be made and said it was a "classic case" of a large lender trying to pressurise a small business by delaying tactics.

Rafe Nauen, chair of trustees at the charity said: "We have little choice but to assume that RBS is deliberately delaying giving its decision in the hope that we will go away or go under; either way it will get them out of paying any compensation."

The charity helps 5,000 people a year with advice on housing and homelessness.

"We are a small charity and being continually held at arms' length by the bank makes it very difficult for us to plan ahead properly," Mr Nauen said. "It is a classic case of the little man versus the big institution but we will not simply disappear to make life easier for the Royal Bank of Scotland."

It was sold its mortgage arrangements by its bankers NatWest, which is owned by RBS Group, in early 2009, just after the financial crisis took hold.

The charity claims the bank persuaded it to support the bank’s existing mortgage with an interest rate hedge product as a "zero cost" option, when the reality is that its loan servicing and debt exposure has actually increased.

The charity also says there is an exit cost of around £250,000 that was not made clear to it when taking out the product.

It says that due to the unexpected extra costs, other costs have also been imposed by the bank in relation to overdraft facilities, interest and service charges.

So if its claim is successful, it would expect to be paid compensation on top of the money it has spent to cover the extra costs of supporting its clients.

Mr Williamson said: "Direct Help and Advice supports people in crisis at a time when merciless Government cuts mean more families and individuals are in dire need and fewer organisations are able to help. 

"It is a travesty that the charity has been forced into this position of limbo with RBS seemingly uninterested in resolving the situation."

A spokeswoman for the bank said: "We are sorry to hear of the frustrations experienced and can confirm that this enquiry is in the very latter stages of review by the independent reviewer. We have advised the customer of the reason for the delay and hope to have this matter resolved shortly."

But Mr Nauen said: "All we want to know is where we stand. There is a huge financial difference in the range of potential outcomes of our mis-selling claim, and while there is this continuing diffidence from RBS it is making life very hard. We will, however, continue to fight our corner."

The background to the mis-selling scandal

Serious failings in the way that banks sold interest rate hedge products were first uncovered by the City Watchdog in 2012, when it was known as the Financial Services Authority.

Consequently last May, the banks were forced to review all sales of the products made to customers since 2001.

The products were meant to insure small businesses against the risk of higher interest rates.

But when rates sunk, companies were left with bills often running into tens of thousands of pounds - or facing large penalties to get out of the deals.

The Financial Conduct Authority has told banks to speed up the compensation process, setting a deadline of May for the misspelling claims to be dealt with.

But RBS which has more claims under review than its big three rivals combined, which may be the reason why it appears to have developed problems processing claims.

It is assessing 9,194 cases, compared with 3,300 at Barclays, 3,253 at HSBC and 1,771 at Lloyds.

By the end of December RBS had dealt with 23 per cent of claims, according to FCA figures.

Video: RBS cash bonuses to be limited

News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Sport
Romelu Lukaku puts pen to paper
sport
News
Robyn Lawley
people
Arts and Entertainment
Unhappy days: Resistance spy turned Nobel prize winner Samuel Beckett
books
PROMOTED VIDEO
News
people
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
News
people
Extras
indybest
Travel
Ryan taming: the Celtic Tiger carrier has been trying to improve its image
travelRyanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
Slim pickings: Spanx premium denim collection
fashionBillionaire founder of Spanx launches range of jeans that offers 'thigh-trimming construction'
News
Sabina Altynbekova has said she wants to be famous for playing volleyball, not her looks
people
News
i100
Life and Style
tech'World's first man-made leaves' could use photosynthesis to help astronauts breathe
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

£450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

Senior Analyst - ALM Data - Banking - Halifax

£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

Java developer - Banking - London - Up to £600/day

£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star