Law firm warns that a generation of entrepreneurs may be lost
A firm handling hundreds of complaints about the demeanour of the banks to small and medium sized businesses, is warning that a generation of entrepreneurs may be lost.
The Manchester law firm Berg reports looks at the behaviour of the major four lenders, RBS, Barclays,Lloyds and HSBC and scrutinises their approach to small business clients.
Berg claims the banks who have offered to address mis-sold financial products are hitting their customers in the different ways by employing what it calls “aggressive redress”, such as by reducing overdrafts and restructuring loans so repayments are rising.
The report warns of severe concerns for the economy as a result in a lack of trust between business owners and banks, and says:
“The firm is critical of not only the banks, but the regulator, the Financial Conduct Authority, too particularly its soft stance over consequential losses claims – the compensation SMEs feel they are due as a result of being mis-sold an unsuitable product.”
The report also says:
“It is not only the financial damage that mis-selling claims have caused, but also the breakdown in the trusted relationships business owners believed they had with their banks. ”
The erosion of trust has left a significant imbalance in the relationship. It is likely that further regulation in the commercial banking sector will become necessary if that imbalance is to be redressed.
The report continues:
“If the Treasury, FCA and banks do not support businesses that have had their financial services arrangements compromised then this could have serious long-term implications for the UK economy. ”
Whilst failing businesses need to be allowed to fail to maintain the natural order of the economy, the strangulation of perfectly healthy businesses has a ripple effect throughout the SME sector, one which could very well see a so-called lost generation of entrepreneurs.
Managing partner at Berg, Alison Loveday said:
“The report into SME banking has been published because we have found that not only has the FCA process been unsuitable for many of our region’s businesses, but that here and across the UK, it is ‘business as usual’ for many banks in the way they are dealing with SMEs. ”
This includes the mis-use of personal guarantees, the recommending of unsuitable lending arrangements, and aggressive attempts to claw back redress costs from the FCA review.
”We have been working with local MPs and businesses to write the report, and I hope it will help draw people’s attention to the fact that a new wave of SME lending malpractice cannot be allowed to happen.”
Source: The Business Desk
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