New group to tackle unfair bank contracts for small businesses
A group of MPs and a lobby group for British banks have joined forces to create a new body to check banks lending contracts are fair, following a steady flow of scandals around lending to small businesses.
The Contracts Working Group will check the contracts offered by banks including Royal Bank of Scotland (RBS), Lloyds, Barclays and HSBC to ensure they meet a set of common standards from the Lending Standards Board.
The group will appoint independent legal experts to carry out the work, which will be overseen by consultants Momentous Change Ltd.
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UK Finance will back the working group along with the All-Party Parliamentary Group on Fair Business Banking, a collection of MPs which is headed by Conservative MP Kevin Hollinrake and Liberal Democrat Norman Lamb.
The group follows significant pressure on the banking sector to clean up its act following a string of scandals in which banks missold complex products to small businesses, often with costly exit clauses.
RBS has also faced particular opprobrium over the actions of its now-defunct Global Restructuring Group, which allegedly deliberately pushed small business customers into insolvency in order to profit.
Santander, Clydesdale and Triodos Bank UK have also signed up to the working group, meaning the vast majority of banking for small and medium-sized enterprises (SMEs) will be covered.
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UK Finance said: “Clear, understandable and fair contracts are the foundations of trust between SMEs and finance providers, allowing SME customers to compare offers and terms across providers.”
UK Finance in March appointed the former head of the Institute of Directors to carry out a review of lending to the sector.
Meanwhile, an independent body is currently in the process of deciding on who will win a pot of cash to boost competition for small business banking, as part of a remedy over state aid concerns following RBS's financial crisis bailout.
Read more: Former IoD boss to lead UK Finance review of small business bank complaints
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