Asset Based Lending: how the government allows accused factoring companies to be judge and jury for their own dirty deals!

The banks' Interest Rate Swaps scam ruined businesses across the UK. sound familiar the only difference is with asset based lending - the banks set up separate companies so that their dirty dealings did not come under their banking governance!  The undercover banker Honestly Banking tell's how the banks have managed to get themselves made judge and jury in the processing of compensation claims - sound familair - it's called the ABFA code of code.

Fantastic, amazing, a triumph! That's really the only way you can describe the FCA review of Interest Rate Swap mis-selling. The wonderful thing about it is that the banks that did the mis-selling have got to design, run and review the scheme. Yes that's right, the very banks that did the mis-selling are conducting their own 'independent' review. What's even better is that the 'independent' oversight is by litigation lawyers who are in the pay of the banks[1] and will use the review process to gather evidence that can be used in litigation against the very people the banks originally mis-sold to.

Admit it, you've got to admire us clever bankers. We've even persuaded the FCA to state publicly that those businesses who have been devastated by the mis-selling of swaps don't need to take any legal advice![2]

“The IRHP review has been set up to deliver fair and reasonable redress to customers where appropriate without them needing to hire lawyers or claims management companies” 

FCA advice

The mis-sale of the Swap went so well first time, why not remove legal representation from the clients as well? What’s better is the banks got a top-secret agreement with the FCA[3], so there’s no oversight of the cosy arrangement we’ve got!

Banks decide who is eligible for redress:

Let's look at how this shrewd scheme works. Firstly the bank decides whether you’re eligible or not to use the scheme. Sneakily the banks use different criteria than normal to exclude those that might cost us a lot of money and the FCA accepted it[4] - result! We decide that you’re 'sophisticated' so you're stuffed – get out and take your swap with you (and don’t dare cancel that direct debit!). Good that gets rid of some of the problem. What's even funnier is we've got the FCA to state that these clients can use the FOS (ombudsman) for redress – but actually if they have more than 10 employees (which is probably why they were deemed ‘sophisticated’ in the first place) they are not eligible to use this either[5] - a stroke of genius!

“Independent” case reviews:

Then we get our 'independent reviewers', giant law firms, to deploy their experienced litigators to cross-examine the clients[6], sorry, not supposed to do that, 'interview' for several hours. We don't give them any of the bank's side of the story, but we get them to spill the beans and get them to admit that they really wanted the Swap and to incriminate themselves so that we can use the recordings in litigation if needs be. Our clever PR people have decided to call this an 'open transparent' process and not to bother to explain the legal ramifications to the mis-sold customers, who have been told not to bother with lawyers after we suggested it to the FCA[7].

“Independent” assessors:

Once the reviewers have got what the evidence need, we then use our army of 'independent' assessors to review the cases and decide if and what redress is due. We've hired in these ex-bankers, many of whom have been made redundant on day rates of £1000+ a day[8], so they had better reach the right conclusion or we will kick them out. Cleverly our HR people have made these assessors set up Ltd companies, so we can limit our liabilities if they are found to have been unprofessional or incompetent.

Redress and Compensation:

We are really pleased with the redress we are giving out. We've taken a leaf out of the best high street retailers book and try and give them a replacement product[9] - what's even funnier is that it's often as bad or worse than the original swap! And it has maybe double the profit in it for us! Also the client who we sold the wrong product to has to accept our advice again - it went so well first time!  We cooked up a wheeze whereby we can ensure these still have a load of break costs and might not be needed anyway. We've also conveniently neglected to build in an appeals process[10], so the client has to accept our findings. Aren’t we smart?!

Delaying claims beyond the limitation date:

Another tactic that's been working well is delaying the claims of customers so they pass the limitation date[11] where they can take legal action against us. It's been a real winner here; especially since the FCA have supported us by telling clients they don't need lawyers. Thousands have fallen for this trick! Of course some will want to go to court, we're not stupid, so we will settle the strong cases on the court steps (there goes another gagging order![12]), but we will let the weak ones go to trial, using the ‘evidence’ we squeezed out of them during the ‘review’ process and then we'll get our legal chaps to make mincemeat of them and get a precedent in our favour. The other good thing is those dear folks at the Financial Ombudsmen really haven't got a clue about all of this, so they are using their default client letter[13] that find in our favour.

Gagging orders:

As you would expect it's not all been easy. We've had to pay out a few times, but we've used gagging orders specially made by our legal friends. The FCA doesn’t allow us to do this as part of the redress scheme, so to get round this we just take this client out of the scheme. We think so little of the clients anyway, we don't mind chucking a bit of extra money to shut them up. We've planned for this already, but we are a bit worried that the stockmarket will be spooked if they know the real size of our provisions[14].

Consequential loss compensation:

Actually we are pretty worried about the consequential loss claims – i.e. compensating clients for anything from loss of profits to the total collapse of their businesses. But the FCA is being very helpful[15], doing their best to discourage consequential loss claims citing time delays, complexity and emphasising the general futility. The FCA has also given us a get-out-of-jail card saying we don’t have to compensate investors and guarantors – so your friends and family who put money into your business can get stuffed.  It’s times like this you know who your friends are. Our mates at the FCA are trying to keep compensation down to us returning interest payments (minus interest payments that would have been paid had we sold the client a less dodgy loan at the time). If we were selling dodgy brake pads that made clients’ cars crash, the FCA would tell the client to forget their wrecked car and injuries and just accept a new set of brake pads from us as compensation.

The Vampires

If there’s a business that’s causing us lots of trouble, or they have some lovely assets we fancy, we have a terrific plan. Firstly we make the business breach some of their lending covenants by using hidden calculations (often in their Swaps) and then put the distressed business into what’s known as ‘business support’ or ‘global restructuring’ and then we use team of specially trained ‘vampire’ bankers to suck out all of the value. Once we’ve extracted as much money as we can, we get our tame valuers to down value the business - we then dispose of it at a profit![16]