Firms deserve more protection from their banks, say MPs

MINISTERS face further pressure to provide better protection to small businesses that are in dispute with their banks.

The treatment of small firms by lenders – in particular the ‘turnaround units’ that are supposed to help troubled businesses but have been accused of preying on them instead – will be under discussion in a parliamentary debate on Thursday. It follows the furore surrounding Royal Bank of Scotland’s Global Restructuring Group, but complaints about other banks are likely to be discussed too.

Lord Cromwell, chairman of the all-party Parliamentary Group on Fair Business Banking, told The Mail on Sunday: ‘There are harrowing cases of abuse of power by banks in that relationship, which are compounded by the lack of an effective or even-handed arbitration mechanism. This needs fixing, and fixing now.’

City regulators are to consult on plans to extend the Financial Ombudsman Service (FOS) to cover more small firms, but this will not be enough, campaigners claim.

Lord Cromwell said the FOS ‘are nice people who do a good job but they are simply not equipped to tackle cases of the complexity that would be involved here.

‘But maybe that is perhaps why some banks are getting behind the idea of expanding the FOS remit?’ Conservative MP Kevin Hollinrake, one of the deputy chairmen of the group, said: ‘It is not just the money and businesses that have been lost.

‘It is also the desperate human cost when someone’s life’s work is taken from them by faceless, uncaring and unaccountable financial institutions that are not only too big to fail but also too wealthy to sue.’