Treasury Select Committee 3

The third mention by the Treasury Select Committee on 26 April 2016




Below is a transcript of the hearing. When reading this bear in mind that my complaint to the FCA was concerning HFC AND HSBC and John Lewis Financial Services Limited (HSBC), both of whom are still trading and neither of whom have had any regulatory action taken against them.

Q250 George Kerevan: On your wonderful phrase of deep diving, which
we may discover makes the headlines, when it comes to HSBC, the Office of the
Complaints Commissioner in December produced a report regarding your dealings
with a complaint against HSBC, which had come to you through a whistleblower.
The Office of the Complaints Commissioner, which regulates regulators, found
against it. In fact, it is the tone of the findings that are quite significant relative to
what you were saying to my colleague Mr Streeting about the importance of
whistleblowers and how we deal with them. Very quickly, the report from the
Office of the Complaints Commissioner said, in finding that you have been
negligent in giving up a whistleblower regarding certain overcharging in HSBC, of
its customers in the UK, that you had presided over a series of events “bordering
on the farcical”. You were “negligent”, “defensive” and had a tendency to “shift
the blame on to the whistleblower”. Can you assure us that your culture has
changed in that regard?
Tracey McDermott: Absolutely. As you would expect, I have read that Complaints
Commissioner decision and the findings were not pleasant reading. I am absolutely
satisfied that we are focused on making sure we get this right.
Q251 George Kerevan: I will just pursue that a bit more, because it is
germane to your argument today that, by cancelling the thematic review and
Oral evidence: Financial Conduct Authority, HC 515 49
undertaking individual bank reviews and reviews into the culture of individual
banks, you can get a better result. Here we have prima facie evidence that, when
faced with a complaint from a whistleblower, which was upheld—the complaint
was correct and no one denies that—into a particular culture in HSBC, you failed
to deal with that. I am sure that you are committed to changing things, but what
has changed in your approach to assessing the internal culture of HSBC that makes
you sure that you can now do that and dispense with the thematic review, given
that we have, according to the Complaints Commissioner, evidence that you could
not do that in the past?

Tracey McDermott: Can I be very clear what the Complaints Commissioner upheld? The
Complaints Commissioner said that we dealt with the complaint by the whistleblower
inappropriately, and we have apologised for that. The actions that the complaints relate to
relate to a subsidiary of HSBC called HFC. They go back some considerable time to a
point in time when HFC was regulated by the Office of Fair Trading, before the FCA took
on responsibility for consumer credit. HFC is no longer operating in the consumer credit
When the original issue came to us, it was looked at by the team and it was decided, for a
range of factors—the OFT had taken some action in relation to HFC—that actually it was
not something that we should focus on. We have agreed that we should review that
decision, in the light of looking again at the complaint. The question that was being
decided then was really about whether we look back at things that a previous regulator,
which was at the time responsible for regulating that firm, has closed off. I do not think it
is related. I do not see it as being directly correlated with the culture review.

Q252 George Kerevan: I accept what you have said. I am not trying to
slap your wrist. Your defence today has been that you do not need a thematic
review, because you can deal with the specific cultures of specific organisations. It
does seem to me that, to a degree, the Complaints Commissioner is suggesting you
were not properly able to handle an analysis of the culture of a particular
organisation. As you just said, you seemed to say to me that it was in the past. It
was another regulator’s fault. Therefore, we did not feel it was germane to use that
organisation here now. You have to reassure us that, if you are going down the
route of looking at the cultures of individual organisations, you can get that right

Tracey McDermott: The point I was trying to make in relation to the fact that it was
previously regulated by the OFT and the OFT had taken action is that an allegation that
has been levelled at us in the past is that we regulate on a retrospective basis, and we
change the rules to suit us when it comes down to it. That is something that, when you are
looking back at action relating to something that was presided over by another regulator,
you have to be very cautious of. As I have said, HFC no longer has a consumer credit
licence; it does not do that sort of business.
I can only reiterate what I have said: we are very focused on the question of culture. We
look at that. We have talked a lot today about what we have not done but, if you actually
look at a number of the things we have published over the course of the past few months
since September, we have published large penalties on banks, asset managers and others.
Oral evidence: Financial Conduct Authority, HC 515 50
We have also had redress secured for payday customers of another £45 million, which we
have published over the past few months. We have published a review into wealth
management suitability. We have published a review into mobile phone insurance. We
are still very much focused on trying to ensure that we are driving good conduct and good
standards, across the financial services sector. Will we always get it absolutely right? Of
course we will not; we are human beings, but we are very much focused on what we are
trying to do and to learn from when things go wrong.