Banks have been accused of “pulling the wool over consumers’ eyes”, after HSBC and RBS joined Lloyds in admitting to sending struggling clients debt collection letters appearing to be from independent law firms that were in fact from the banks’ own staff.
Andrew Tyrie, the chairman of the Treasury Select Committee, launched the broadside against the industry as his committee published correspondence sent by the banks, including sample letters from the supposedly independent solicitors.
HSBC admitted to dispatching letters under the name DG & Co, while RBS used the name Green & Co on its missives.
Barclays denied engaging in the practice, but chief executive, Antony Jenkins, admitted that his bank used “alternative names for its in-house debt collections and recoveries activity” to “encourage customers who have fallen into arrears to re-establish contact”.
Santander UK’s chief executive, Ana Botin, also denied her bank had used supposed independent solicitors to chase money, but admitted that Abbey National, one of a number of British banks bought by the Spanish outfit, had done so in the past.
In July, Lloyds Banking Group admitted that its lawyers had used the name SCM Solicitors to chase debt. All of the banks concerned said they no longer engaged in a practice that has become the latest scandal to rock the industry.
Mr Tyrie said: “These sample letters seem to have been designed to pull the wool over consumers’ eyes. Many customers will have been understandably misled.
“What is more, from these responses it seems that this practice was widespread. Banks say that they have now stopped sending such correspondence, but it should never have happened in the first place.”
Mr Tyrie chaired the Parliamentary Commission on Banking Standards, which recommended tough new rules, including handing the Bank of England powers to break up banks if they try to get round an “electrified ring-fence” protecting their retail arms from casino investment banking.
A new offence of “reckless misconduct” was created to punish those who lead their banks to the wall, while watchdogs have been demanding named bankers take charge of improving standards or face consequences.
In June, the payday lender Wonga was told to pay more than £2.6m in compensation after sending letters from non-existent law firms to clients in arrears. Other banks, already having to re-visit hundreds of thousands of payment protection insurance mis-selling cases, may now themselves face regulatory action.
HSBC said M&S Financial Services had also engaged in the practice before it bought out the retailer’s banking arm.
RBS’s chief executive, Ross McEwan, said the letters “had become a common industry practice in a sector that had come to put its own interests ahead of customers”.Reuse content