Even charities are fair game

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There’s no limit to the deceptions that high street banks use to wring money out of their customers. If you think that I’m exaggerating, consider the plight of Direct Help and Advice, a charity based in Derby.

This charity offers support to people who are in difficulty. It aims to help them to avoid debt and homelessness. It’s unlikely that its employees need to be skilled in currency trading, commodity futures, or hedge fund management. They will be called upon to give more mundane advice.

This is so obvious that you might wonder why I bothered to say it. Bear with me. It will be clearer as this sorry tale unfolds.

The charity needed to arrange a mortgage for its premises. It applied to a bank. This is the point at which it  became ensnared in a web of devious machinations, fuelled by greed and deceit, that banks so excel in.

The bank in question was NatWest, though I don’t suggest that it is any more devoid in common decency than any other. This bank pressured the charity into taking an interest rate swap product to help to protect the mortgage. This was presented as a ‘zero cost’ option. This advice was unsound. It was the opposite of the truth.

No-one at the charity was familiar with this kind of product, and it made the fatal error of trusting the bank not to lie to it or set out to ruin it. We know now that this is a dangerous strategy, and we’ve learned how much damage interest rate swaps can do, At the time, though, there was no reason for the charity to sense any danger.

The inevitable happened; interest rates fell, and the mortgage repayments rose steeply when most others were falling. The charity had difficulty meeting its commitments to the bank and still being able to offer help to its clients. It could only extricate itself from the mortgage by paying a fine of a quarter of a million pounds to NatWest Bank.

The charity’s funds began to be sucked into the bank’s insatiable maw. It was brought to the edge of collapse, then the bank took over its finances via a third party. You know the kind of firm: the ones that run a company into the ground, then sell its assets.

The regulator has recently told the banks that lying to their customers, in order to persuade them to buy a product that will damage them, is not best practice. They have been ordered to compensate those customers who were mis-sold interest rate swaps.

Who will decide whether or not a customer is a victim of mis-selling? The banks, of course. Who will decide on the time-scale for the investigations and compensations? You’ve guessed.

This set-up gives the banks even more advantage than they normally enjoy. If they take their time sorting out this unedifying mess, businesses will go under and leave no-one to be compensated. This is exactly what is happening to Direct Help and Advice. NatWest is permanently ‘in the latter stages’ of the process, but never actually completes it. It refuses to give any indication of a date when its ruminations might end. What odds do you give that this charity will survive?

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