Last month, Aberconwy MP Guto Bebb was just another one of the Conservatives’ rebellious back-benchers. A forthright campaigner, Bebb may be known among advisers as the man behind the parliamentary debate into whether the FCA is fit for purpose.
While the regulator ultimately escaped a vote of no confidence, Bebb has been part of a movement that has already forced multiple concessions from the Government, defeating Chancellor George Osborne’s plans for both pension tax relief reform and changes to tax credits.
The recently proposed (and now spiked) cuts to personal independence payments saw Work and Pensions Secretary Iain Duncan Smith resign in protest, and, in the mini-reshuffle that followed, Bebb was promoted to under-secretary of state for Wales, and named a Government whip.
Speaking to Money Marketing ahead of his promotion, Bebb says his FCA debate was the logical continuation of his fight to question how small businesses missold interest rate swaps are being compensated.
It is a topic that has been central to his parliamentary career since he received a letter from a constituent in 2012. “It came up with constituency casework, a chap called Colin. He came to see me about the fact he had been sold this product, which destroyed his business. And to some extent, you think that’s just a hard luck story.
“But looking into it, it was very clear he’d been sold a pretty toxic interest rate swap product, and the clincher was when we managed to get hold of the call [with the bank that sold the swap].
“It was fairly clear to anybody listening to that tape he didn’t understand what he was buying. After four occasions where it had been explained and he’d said ‘I don’t really get it’, they said ‘well, have you ever had a fixed-rate mortgage? It’s basically the same as that’.”
Bebb explains borrowers taking out a fixed-rate mortgage understand while they will not benefit if interest rates fall, nor will they be penalised.
“But with the product Colin had, he was being penalised, and, as interest rates went down, it ended up destroying his business.
“And even though a redress offer was made because the company has gone into administration, the beneficiary of that will be the bank as the main creditor.
“Colin was last heard of living in a van in his mother’s driveway. It’s a terrible tragedy.”
“I find it very concerning every time banks are going to lose, they settle out of court with
a gagging order”
The case inspired Bebb in 2012 to launch an all-party parliamentary group on interest rate swap misselling. In January this year he submitted a dossier of 120 cases to the FCA to raise concerns Royal Bank of Scotland customers in particular were being poorly treated and being offered alternative swaps rather than full redress.
Bebb says disputes tend to centre on whether taking out an interest rate hedging product was a legitimate condition of business loans offered by banks.
For example, it may not be legitimate for a bank to make such a requirement if its need is only stressed to a business at the last minute, or if the cost of the product is not explained in full.
“We seem to see with RBS that it is relying on a condition of lending which is very generic. In other words it was basically saying you will need some sort of interest rate protection product in order to qualify for this loan.
“But we have examples from Santander, HSBC and Lloyds where they have decided that when the condition of lending is that vague, it’s not legitimate.”
Bebb is also worried by the numbers of cases being settled outside the regulator’s formal redress scheme, either because the customers are deemed large enough to pass sophistication tests and therefore do not qualify, or because customers are unsatisfied with their offers.
“I find it very concerning every time banks are going to lose, they settle out of court with a gagging order. I know of a case where the offer within the redress scheme was minus £44,000. The bank said ‘yes, you were missold, but you should have taken another product that would have cost you more,’ and they offered to be generous and take nothing instead.
“The out-of-court settlement for that case was over £2m. It leaves you with no confidence in the redress scheme, but I can’t give you the name of the case or the bank because there’s a gagging order.”
Bebb admits to being frustrated at the lack of progress, despite his efforts. “It’s just an ongoing catalogue that we’re getting from the FCA. I don’t think anyone is particularly happy with them, and all we’re getting is a straight bat.”
All of which means when new FCA boss Andrew Bailey appears before parliament’s Treasury select committee for his appointment hearing, Bebb predicts a tough ride.
“He has an organisation that is low on confidence, and has lost the confidence of MPs and the businesses that are supposed to be protected by it. He needs to rebuild that confidence and trust, and he can do that by making sure the regulator acts in a fashion that is more timely, open and transparent.”
The MP argues Bailey’s appointment means any fig-leaf notions that the regulator is independent from the Government should be abandoned.
“Whatever your view of [former FCA chief executive] Martin Wheatley, the decision not to reappoint him was a political one. My understanding is the candidate for the chief executive’s position never really applied for the job.
“So you have a so-called independent body looking for a chief executive, and the person appointed hadn’t applied, but was approached by the Chancellor.
“If the Chancellor and the Treasury want to control the FCA, that’s all well and good, but can we give up on the idea that it’s independent?”
March 2016 – present: Parliamentary under-secretary of state for Wales and Government whip
2014 – 2016: Chair of the all-party parliamentary group on the collapse of Connaught Income funds
2012 – 2016: Chair of the APPG on interest rate swap misselling
2010 – 2015: Member of the Welsh affairs select committee
2012 – 2015: Member of the public accounts committee
2010 – present: Member of Parliament for Aberconwy
2006 – 2011: Business development director, Innovas Wales
2005: Conservative candidate for parliamentary seat of Conwy
2003: Conservative candidate for Welsh Assembly seat of Conwy
2002: Conservative candidate for parliamentary seat of Ogmore
1993 – 2011: Founder, Partneriaeth Egin Partnership