Banking StandardsWritten evidence from Michael Cassidy

This submission relates to the practices of the banking insolvency departments and how the banks deal with small business customers and is a response to the call for evidence by the Parliamentary Commission on Banking Standards.

I submit that the banks are dishonest and that their activities are detrimental to the wider economy as well as their customers. I submit that the legal immunities that the banks have in law is a large part of the reason for this. The banks are also allowed to break the law.

I have enclosed a history of my own experiences with Lloyds Bank as an explanation. The issues raised are restricted, as best as they can be, to those likely to be of relevance to the work of the Commission.

A summary of the general points are:

(a)The banks are able to foreclose by demanding immediate repayment of an overdraft. Clearly this is impossible.

(b)The banks have legal immunities. They do not owe their customers a duty of care, which means that they cannot be sued for negligence.

(c)The banks are able to deliberately increase their customers’ debts and expect the customers to pay those debts. Banks do not owe any duty to mitigate their losses.

(d)Banks are able to continue charging interest on loans that they have called in and after they have foreclosed on a business. Receivers, in practice, do not pay any interest and operate on a totally different basis to that of the customer.

(e)In as much as banks can be sued for breaching various duties in equity, in practice the judiciary manipulate the interpretation of those duties to enable the banks to avoid liability.

(f)The judges are strongly biased in favour of the banks and will manipulate court hearings and interpret the law to advantage the banks and their receivers.

(g)Even when the banks and/or their receivers have broken the criminal law, the police are strongly opposed to investigating their crimes. This puts them completely above the law.

(h)In theory the banks and receivers are not allowed to sell to themselves or their agents. In practice, they can do so freely and with impunity.

(i)The legal process is very drawn out and expensive. A customer is supposed to wait until the receivership is concluded before he can make any claim for damages. The fact that a customer does not see the reports and other documents produced by the banks and receivers makes this very difficult. There is no longer any legal aid for business matters.

(j)In theory, the banks and receivers are supposed to account for the proceeds of sale and any income. In practice, they do not have to properly do so. Even when monies are missing, the judges will cover this up.

(k)The banks, the receivers, their lawyers and the judges use smear tactics to try and discredit the customers and cover up the banks’ and receivers’ actions.

(l)There is a wider public interest. One of the Receivers who I was involved with subsequently sued the Bank of England using the same smear tactics deployed against me.

(m)The above problems will not be rectified without a change in the law and in the approach to dealing with banks and their receivers. There is no point in the government wondering why banks act as if they are above the law, when they are in fact above the law.

Recommenations for Action

1. The law should be changed so as disallow the banks demanding instant repayment of overdrafts, which is clearly impractical.

2. The courts dealing with receiverships should no longer be presided over by judges alone. Two small business representatives should sit alongside the judge. A levy can be placed on the banks to pay for this.

3. The owners of a business should be able to ask the courts to investigate a receivership for any reason.

4. The law should be changed to impose a duty of care on the banks to their customers, and to ensure that banks are obliged to mitigate their losses. Banks should be liable for negligence just as is the rest of society.

5. Banks should no longer be able to charge interest or other costs on borrowings once they have foreclosed on a customer. The outstanding debt should be frozen as at the date of foreclosure.

6. Neither the banks nor their customers [nor receivers] should be allowed to claim legal costs for a court hearing. If a party chooses to employ lawyers then they would be of course free to do so, but it will be at their own expense. Presently a businessman cannot claim legal aid relating to a business matter and, especially in a foreclosure situation, he is at a complete disadvantage. A bank should be able to explain to a court the financial position without the aid of barristers and solicitors. This will be made easier if business people are sitting alongside the judge as they will be able to draw upon their own business experience and knowledge.

7. When banks or receivers have behaved in a criminal manner, they should be prosecuted with the full force of the law. The police should no longer be allowed to turn a blind eye to criminality.

8. Judges who aid and abet criminality by the banks should be struck off—if not prosecuted.

9. The banks and receivers should not be allowed to sell customer assets either to themselves or their agents and subcontractors. This should be a criminal offence. The owner of an asset should be allowed an opportunity to match a bid from another source.

10. Reports produced by receivers should be disclosed to the owners of a business as a matter of routine. They should not be able to continue operating in secret. Banks should likewise disclose full details of their expected recovery of a debt and the expected amount that will need to be written off.

5 October 2012

Prepared 24th June 2013