Lawrence Tomlinson, Entrepreneur in Residence at the Department for Business, Innovation and Skills has presented a dossier to the Secretary of State for Business, Vince Cable, with evidence of misconduct towards businesses by the Government-backed banks. Uncovering disturbing patterns of behaviour of towards businesses, all of which impede lending, Lawrence has exposed activity which flies in the face of the Government’s growth agenda.
Lawrence heard an abundance of cases in which businesses were deterred from accessing finance before even being given the chance to apply. The evidence he has gathered also suggests that statements that 9 in 10 loan applications are accepted are extremely misleading; given so many businesses don’t even get the opportunity to make an application. Other cases documented businesses who were charged such astronomical fees whilst in ‘Business Support’ that their business was put into financial distress.
In some cases, debt was even sold without the prior consent of the business. Invoice factoring also appears sometimes to have been misused by banks to extract as much money from the business as possible, even if this means putting the business into administration. Many of Lawrence’s findings are backed up by ex-bankers who indicated that these issues occurred on an institutional level. Stating their reasons for leaving the bank, one commented that:
“I just wasn’t prepared to apply the cruel, inhumane, non-commercial policies and decisions.”
Another said:
“I was fed up of being a well-paid post box for the businesses to apply and for the bank to deliver their response. The centre frequently overrode the decisions which were made by relationship managers… The idea was to lend as little as you have to in order to remain ahead of your competitors but make sure you got as much out of it as possible.”
Most striking, however, was the utter fear many businesses felt, meaning they did not dare speak out against the bank for fear of their facility being removed, BACS facilities restrained, or being subject to civil or criminal action. Lawrence was unable to even include anonymised versions of some of the cases he heard for the fear of backlash. Lawrence commented that:
“I knew there was a lot of animosity towards the banks but the response I received was overwhelming. There is a complete lack of trust towards the banks, and in many cases, this is for a justifiable reason. This is coupled by an astonishing fear of the banks, no-one dares tell it as it is! It only takes the silence a few good men for bad behaviour to triumph. How can we increase lending when there is this level of distrust and the message remains ‘business as usual’ in the banks? It is time for growth not greed.
“I know there will be similar instances out there that have not yet been uncovered and I encourage affected businesses to come forward. In particular, there is an on-going Independent Review of RBS’ lending practices which I strongly urge businesses to submit evidence to.”