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Lending Regulations

Volume 459: debated on Wednesday 2 May 2007

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Watts.]

May I start by saying that, unusually, I did not want to call for this debate, but Barclays bank has given me no choice? That is the same Barclays bank that, only weeks ago, announced record profits of £7 billion. It is the same Barclays bank that paid one of its executives £22 million last year alone. We all know that Barclays likes to make a killing in the City, and we congratulate it on its success, but hand-in-hand with success goes the corporate responsibility to be reasonable to customers, particularly the most vulnerable customers. I have discovered that there is a sinister side to Barclays, and I want to share it with Members this evening.

Like many Members, I write tens of thousands of letters a year on behalf of my constituents—there are thousands and thousands of names on my casework system—but I do not ask for Adjournment debates on every case that comes along. I would only do so in extreme cases when every other effort has failed. This is such an occasion. My constituent, Mr. Aranda, first saw me at one of my advice surgeries in February. He lives very modestly in a small flat at The Beeches in Morden. Mr. Aranda is not a profligate man—he works hard and he wants the best for his family. He started a small business cleaning carpets, because he wanted to get on. He speaks very little English, and I have been dealing with him mainly through his daughter. When he came to my surgery, he had stomach cancer and was very poorly. He was not recovering as fast as expected and he was clearly under stress.

Through Mr. Aranda’s daughter, I found out that before his illness, he had taken out a couple of loans with his bank—Barclays. He had been a good customer of Barclays for many years, and he went to his local branch believing that it would give him a good deal. Before I go any further, I should confess that I am not usually the greatest expert on financial small print. I understand that there may be in the not-too-distant future a vacancy for the position of Chancellor of the Exchequer. I should like to reassure the House that I will not be applying for any such vacancy. I may struggle to decipher the small print of financial contracts, but at least I understand English. Mr Aranda does not understand English very well. Barclays sold Mr. Aranda his loans in English, and it also sold him two insurance policies to cover him in case of illness. Those policies were with Barclays Insurance Dublin.

It is not clear whether Mr. Aranda would have obtained a better deal elsewhere on his loan, or whether he should have obtained his insurance with another company. It is not even clear whether the loan depended on buying insurance from Barclays in Dublin, or whether Mr. Aranda believed that he had to buy his insurance from Barclays. Nor is it clear whether Mr. Aranda should have been advised about insurance that covered all his financial commitments, including his overdraft and credit cards. It is clear, however, that Mr. Aranda was sold Barclays products in a language he barely understands, with small print that even native English speakers find confusing, by a member of staff who was under pressure to maximise sales.

Barclays has form when it comes to selling unnecessary financial products to confused customers. In March, the BBC broadcast the results of a nine- month investigation into its sales techniques. An undercover investigator was told by a bank trainer that he “loved” receiving calls from customers complaining about bank charges. He said:

“They’d phone up, start crying and blaming you and telling you their kids are going to starve. And I’d be like, ‘I don't know you—I don't care.” I was just thinking, ‘you’re not getting it back.’ I was a right git.”

The investigator revealed that her trainer, whom Barclays had chosen to teach the bank’s new staff how to behave to customers, said:

“I hate it when they say the customer is always right. It’s just ridiculous. Someone was stoned when they made up that policy.”

The reporter said that a

“cynical attitude to sales—and to customers—permeated every aspect of my work with the bank.”

After her experience of working for Barclays, she added:

“Barclays, like most banks, has a system of targets and bonuses to encourage its staff to sell. I saw the effects of the ruthless target-driven environment. In just four weeks in my branch, I saw one of my colleagues break down in tears because of the pressure to sell and I heard about another from a different branch being suspended, accused of a series of misdemeanours...Mis-selling seemed to be rife.”

Naturally, Barclays denied the contents of the documentary, but I can well imagine how confused Mr. Aranda may have been when he was sold his loans and insurance policies. He had a current account with Barclays, an overdraft with Barclays, and a Barclaycard credit card with Barclays. I should have thought that the best thing would have been to get an insurance policy that covered those high interest products, but that is not what happened.

Leaving aside the question whether Mr. Aranda was mis-sold financial products, once he became ill, surely the insurance policy would simply pay out and his financial concerns would be behind him. Unfortunately, when Mr. Aranda was taken ill that was not his experience at all. Mr. Aranda was ill for some time before the specialists confirmed that it was cancer. In order to find out what was wrong with him, he had to undergo some very invasive and distressing procedures. He was finally diagnosed with stomach cancer, and ultimately underwent major surgery in September last year. But he had been struggling with work for much longer than that. He became reliant on means-tested benefits, and had been in financial difficulties from as early as January 2006.

Instead of making things easy for Mr. Aranda when he got into financial difficulties, Barclays imposed onerous conditions on its policies. It refused to pay out unless he provided several medical certificates a month. These cost £80 and more for every month, and the cost of the certificates was not covered as part of his insurance. Barclays simply expected someone suffering from cancer and dependent on benefits to shell out £80 a month to get what he was owed. That was equivalent to one week’s income per month.

Barclays is not the only villain of the piece. I shall use this opportunity to highlight the activities of Morden Hall GP practice. I am very concerned that GPs, who have been given extremely generous new contracts under the Government, are continuing to levy unfair charges on their patients. Morden Hall GP practice was charging Mr. Aranda £20 for each of the medical certificates, no matter how often they were required, and no matter what the real cost of writing them. Each certificate would have taken just a few minutes to write, yet the charge was £20 each time.

When the public affairs industry spotted that I was holding a debate on banks, I received several calls asking whether I was going to raise the issue of excessive charges for writing simple administrative letters. Well, I am, and I hope that the House will send out a message tonight to GPs that MPs are angry about the way they charge patients. The practice should cease. GPs should not charge people like Mr. Aranda for certificates. They should not charge MPs like me for correspondence when we write on behalf of our constituents. They are very well paid, and that is part of the service that we expect. However, that is a debate for another occasion.

Mr. Aranda was struggling to get a payout from Barclays and struggling to pay for all his medical certificates when he came to see me in February 2007. He wanted me to see what I could do to make things a little easier. He also revealed some extremely disturbing practices by Barclays. He first attempted to claim his insurance in March 2006. Barclays admits that the claim was delayed, although it blames this on the GPs. However, his insurance did not cover all his commitments, and he used the payments that he did receive just to get by, or to keep his overdraft down.

Throughout 2006, Mr. Aranda started to get more and more threatening phone calls from the Barclays’ collections team. Even Barclays admits that it instigated 34 phone calls to Mr. Aranda. He says he was telephoned more often than that. Indeed, he claims that some of the calls were at 8 o’clock in the morning, even at the weekend. Not surprisingly these threatening phone calls demanding repayment were not good for Mr. Aranda’s health. His consultant, Mr. Allum of the Royal Marsden, has written to me, stating that he suspects that the calls were

“contributing to a relatively slow recovery which Mr. Aranda is experiencing”.

He added:

“I would stress that the financial pressures under which he is living . . . will contribute adversely to his recovery.”

So I decided to take up Mr. Aranda’s case. I put him in touch with a financial expert from the citizens advice bureau, thanks to the help of the Wimbledon Guild of Social Welfare, and I wrote to Barclays, asking it to deal with Mr. Aranda compassionately. Normally, when I write to such organisations, I expect matters to be dealt with in good time and fairly. In total, I have written eight letters to Barclays and four letters to Barclays Insurance in Dublin, and the issue is still not resolved. At first, Barclays Dublin refused to answer me, because I had not completed the correct consent forms. I wrote back with a copy of the statutory instrument that showed that that was not required from MPs. Some of the answers that I received were confusing and unclear, so I wrote asking to meet somebody to discuss the case. Barclays refused. A customer relations manager said:

“I understand you have requested a meeting with ourselves at Barclays on a number of occasions to try and bring matters to a resolution, however, to date we have not arranged for this to take place. Having reviewed Mr Aranda’s case, I do not believe there is any benefit in us holding a meeting at this present time. Regrettably, this is not a matter which can be resolved within a meeting.”

I felt that that was a deeply unsatisfactory response, and phoned Barclays. I was sent from pillar to post. I still have dreams about the music that was played while I was kept on hold.

I phoned the chief executive. I did not expect that he would answer my call, but I did think that somebody in his outer office might have the courtesy to speak to me. No; I was referred to a polite young woman who worked in the call centre. She could not answer my questions—there is no way in which she could have done so—so I wrote to the chief executive to say that if no representatives would meet me, I had no choice but to take the company’s behaviour to the Floor of the House.

I had no reply, so I was true to my word. I requested an Adjournment debate, and I still had no reply. The debate was granted, and its title was published. Still I had no reply. Barclays’ competitors contacted me to ask whether they could help, but there was still no reply from Barclays. Yesterday, however, the British Bankers Association told Barclays what everyone else already knew—that I was going to complain about its conduct in the House. Finally, Barclays wanted to speak with me.

If anyone says that being an MP cannot achieve anything, nobody should believe them. After 10 years as a Member of Parliament, I am privileged to tell the House that I have finally received the supreme accolade—a phone call from Barclays. I was called by Katherine French, the customer services director, and Wendy Deller, the public affairs director. Then, last evening—it was like several buses arriving at once—I received a third call, from Gary Hoffman, the group vice-chairman of Barclays. They were all obviously concerned about the publicity that this debate might generate, but while they were very interested in me and the damage that I might cause, they did not seem very interested in Mr. Aranda. They did not once ask me how he was or whether he was finally recovering. No, they were more concerned about me and the damage I could do than about their customer. They tried to convince me that such cases did not usually happen and that they normally deal with MPs better. They said that the letters to me should have been drafted by someone more senior, and apologised for the tone of their letters to me and to Mr. Aranda, although I could not get an apology for their contents. More to the point, I did not get an apology for the threatening phone calls that he had received at all times of the day and night. They did not apologise for worrying a man suffering from cancer to distraction with their harassment. They claimed that the poor quality of the letters was an exception to their usual rule. However, if they had been genuinely concerned about the welfare of their customer, I might have believed them. But that never happened.

I hope that this debate has helped raise the issue of potential mis-selling by banks, and Barclays in particular. I hope that it has highlighted the techniques that Barclays uses when its customers become ill and are unable to maintain payments on their loans, even when they have insurance policies with their bank. I hope that it has demonstrated the difficulty that such people encounter in squeezing any money out of their insurance company, Barclays Insurance Dublin. I hope that it shows the low priority that such banks give to customer services when things go wrong.

If banks such as Barclays refuse to deal with customers as ill as Mr. Aranda with any degree of humanity, I hope that the Government will call the banks in and remind them of their responsibilities. If further regulation is required to instil even a smidgeon of kindness into their activities, I hope that the Government will consider imposing it on Barclays. If Barclays can afford to pay £22 million to just one of its executives out of its profits of £7 billion, it can afford to pay just a little respect to my constituents.

Thank you, Mr. Speaker, for this opportunity to put this case forward.

I congratulate my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) both on securing this debate and on her persistence and tenacity in pursuing the interests of her constituent. That is clearly a tribute to her efforts, as well as a model and a lesson on which other Members of Parliament may want to draw in understanding how to deal with situations where it feels as though bureaucracy has put up a brick wall.

On behalf of all other Members in the House, I join my hon. Friend in expressing my great regret at the stress and severe illnesses that her constituent has suffered and send him our best wishes.

My hon. Friend said that it often feels as though one waits a long time for a bus and then three arrive at once. I, too, have been contacted on this issue by senior figures at Barclays. I will return to the fourth bus in a moment.

Before I do so, let me respond more broadly to the points that my hon. Friend made. As she said, she is not only raising the particular case of her constituent but wanting wider lessons to be drawn from it. I agree with her on two points. First, banks play an important role in our economy. Having a strong and efficient banking sector is necessary for the effective working of the national and, indeed, the global economy. I know from my experience that Barclays plays an important role globally in our economy. Secondly, banks play an integral role in our society and have important responsibilities as institutions, and as an industry, in ensuring not only that all consumers get a fair deal but that the most vulnerable members of society are properly supported and protected.

Over the past year, one of my responsibilities at the Treasury has been to work with the banks to try to reduce the number of individuals in our society who are disadvantaged because they do not have access to mainstream banking services such as a bank account, to ensure that banks play the role that they should in helping to get advice to people about financial products and services, and to ensure that when individuals get into financial distress banks recognise their responsibility to support them. One of the proposals that the Treasury has made to the review of the banking code that is being undertaken by an independent reviewer is aimed at ensuring that the code contains proper procedures, expectations and obligations as to how all individuals who get into financial distress should be supported. I hope that we will be able to make progress in that area so that the problems that my hon. Friend discussed can be prevented in future.

As my hon. Friend will know, it is difficult for me, as a Minister, to comment on the individual specifics of a case. Let me explain why. One of the reforms that the Government introduced was the setting up of the Financial Services Authority and the creation of a single financial ombudsman scheme within the framework provided by the Financial Services and Markets Act 2000. We have tried to ensure that regulatory oversight of often complex financial products is performed properly and with the needs of consumers firmly in mind, so that consumers are treated fairly but regulatory and compensatory bodies are in place for when things go wrong. It is vital that the Financial Ombudsman Service is, and is seen to be, independent of Government so that it can deal with complaints against financial services firms and provide a safety net for consumers. Its credibility, authority and value to consumers would be undermined if we started to intervene, case by case, in individual cases. That is why I do not want to comment in detail on the merits of the particular case that my hon. Friend raises, although I would say that any constituent of hers can always go to the FOS if they believe that they have been badly advised or treated unfairly. She might want to consider that further.

My hon. Friend also raised several wider issues based on the specific case, and I will comment on them. First, she referred to payment protection insurance, specifically the selling of such products. Payment protection insurance typically protects a borrower’s ability to maintain credit repayments in the event of becoming unable to do so owing to, for example, accident, sickness or unemployment. It can provide valuable protection when people are at their most vulnerable, and the Government recognise its potential value, if sold properly.

That, however, has clearly not always been the case, and the Government are fully aware of the concerns that have been expressed about the suitability of those products for some individuals. We are closely monitoring the work of the Competition Commission and the FSA on that. We fully support efforts to improve consumer protection and raise selling standards.

Secondly, my hon. Friend raised PPI selling to consumers who do not understand the policy fully because they do not have a good grasp of English. There are no specific FSA rules to deal with that. However, under the umbrella of treating customers fairly, the FSA requires firms to disclose sufficient information to consumers to allow them to make an informed decision about the product they are purchasing. Current FSA work is testing industry progress in improving selling standards. I shall ensure that it specifically examines the issue that my hon. Friend raises about language and comprehension as part of its work. After the debate, I will write to the chairman of the FSA to alert him to my hon. Friend’s concerns.

With an “off-the-shelf” purchase such as PPI, it would be impractical for firms to provide individual information. If customers want more specific or tailored information, they should clearly seek appropriate advice. I repeat that I will raise the specific issue to which my hon. Friend referred with the FSA.

My hon. Friend also raised the high cost of complying with insurers’ requests for medical information. As she knows, the way in which claims are tackled will form part of the terms and conditions between the insurer and the person buying the insurance. For PPI polices, the insurer will require the policyholder to provide evidence of any illness or unemployment. For illness, the insurer is likely to require a medical certificate that will justify the claim. That may be at the cost of the policyholder, depending on the specific insurance contract that is being sold. I understand that Barclays requires the policyholder to provide and pay for any proof that is required, although if it asks the policyholder to undergo a medical examination, it will pay the fee. I am told that that is not out of line with market practice. It is important that that is clearly stated in the policy terms and conditions.

As my hon. Friend said, however, the key issue is whether the terms and conditions are properly understood and explained at the time. Although I do not comment on the specific case that she raised, a general problem in the PPI market is that, too often, the policy has not been properly explained. It has therefore not been properly comprehended.

My hon. Friend raised wider points about the role of GPs. Commenting on that would take us outside the terms of the Adjournment debate and my role as a Minister. However, as a colleague and fellow Member of Parliament, I say that the sort of examples that she gave cause me—and probably all of us—some concern. The danger that the most vulnerable people in our society are not getting the support that they need because they cannot find the sort of sum that she mentioned is genuinely worrying.

Let me deal with the conduct of Barclays. My hon. Friend raised the wider issues that the BBC’s “Whistleblower” programme covered. I stress that the Government and the regulators are taking the allegations in the programme seriously. The Banking Code Standards Board and the Financial Services Authority are looking into some of the issues that came out of the programme. For example, the Banking Code Standards Board is looking at the upgrading of current accounts, and later this year the FSA will carry out work on information security, which will include staff vetting for working in a bank. My hon. Friend will understand that I cannot comment on the “Whistleblower” case, but, as I said, we take these issues very seriously indeed.

Finally, let me return to the conduct of Barclays in this case. It is not right for me to comment on the individual complaint and fetter the discretion of the independent financial ombudsman, but, like my hon. Friend, I have had some communication with Barclays, which contacted my office today. It might help my hon. Friend if I read out the position as summarised by Barclays bank to me. It says:

“Barclays views the prompt and fair handling of complaints as of the highest priority, whether they come from a Member of Parliament or not. Clearly, on this occasion, which we view as an exceptional case, we fell well short of the standards to which we aspire. We have apologised unreservedly to Ms McDonagh for any failings in our handling of this case, and offered to meet her with a senior director to resolve any outstanding issues. We can only express our deepest regret to Ms McDonagh, and her constituent, that she has had to go to these lengths in this case.”

It is not for me to comment on this statement of Barclays. However, it has made very clear its regret for falling short of the standards to which it aspires. If has offered to meet my hon. Friend to resolve any outstanding issues, and it has expressed its deepest regret that she has had to go to these lengths.

I think that if the outstanding issues can be resolved, my hon. Friend’s constituent will be very pleased that she has been willing to go to such lengths to see proper treatment of this problem. I commend my hon. Friend for the action she has taken, for the efforts she has made and for bringing the case to the House’s attention, so that we can draw any wider lessons and ensure, where we can, that we avoid a repetition of these unfortunate incidents.

Question put and agreed to.

Adjourned accordingly at twenty-seven minutes past Seven o’clock.