Mastercard £14bn ‘overcharge’ legal action fails

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A £14bn class action lawsuit against MasterCard has been thrown out by the Competition Appeals Tribunal.

The former financial ombudsman, Walter Merricks, had claimed that 46 million consumers had been overcharged by MasterCard over a 16-year period.

But the court ruled that the case could not proceed through a collective – or class – action.

The ruling was welcomed by Mastercard, which said the claims were completely unsuitable.

The tribunal found that even if a loss had been suffered, and could be estimated across the whole class, there was no way any individual could receive compensation equal to the loss that he or she had actually suffered.

The case was filed in September 2016, and followed a European Court of Justice (ECJ) ruling against the level of so-called interchange fees – the amounts that retailers have to pay on debit and credit cards.

It related to the fees charged by MasterCard between 1992 and 2008.

“We welcome the Competition Appeal Tribunal’s judgment refusing certification for the proposed collective action,” said a spokesperson for Mastercard.

“As set out in MasterCard’s arguments to date, we believe that the claims were completely unsuitable to be brought under the collective actions regime.”

Interchange fees have since been capped by the European Union.


Lloyds under fire over HBOS fraud compensation

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Lloyds Banking Group has said it is close to offering compensation to 30 customers caught up in a criminal conspiracy involving former bankers at its HBOS subsidiary.

The bank has already missed its own deadline of 30 June for paying redress to all victims. So far, only five have accepted compensation offers.

MPs and victims have criticised the compensation scheme.

The fraud saw small businesses pressed into hiring “turnaround consultants”.

Two corrupt HBOS bankers pressured the customers into using consultants Quayside Corporate Services, led by David Mills.

He and his accomplices bribed the bankers with cash, gifts and prostitutes, then used their relationship with the bank to bully the business owners into handing over exorbitant fees and, eventually, control of their companies.

The business customers, in the words of a judge, were left “cheated, defeated and penniless”.

‘Progress’

After bad publicity following the fraudsters’ convictions in February, Lloyds chairman Lord Blackwell said compensation claims would be handled “within weeks, not months”.

On Friday, the bank published an update on its compensation, saying it was “close to” making 30 offers.

Adrian White, chief operating officer for commercial banking and the man leading the review, said: “We are now continuing to make progress in getting offers to victims of the HBOS Reading fraud. We have now either made offers or are in the detailed assessment stage for nearly half the victims in the review. It is important we get the fullest possible information from victims to ensure we can factor in everything that could contribute to their compensation offer.”

But so far only 16 compensation offers have been made – and many more were caught up in the fraud.

The banker at the heart of the fraud, Lynden Scourfield, was in charge of supervising accounts for more than 250 small business customers.

Unsettled

Victims of the fraud have criticised the bank for seeking to dictate the terms of its compensation scheme rather than seek their approval.

They were not asked to agree the bank’s appointment of Professor Russel Griggs to review its compensation offers.

They have also been unsettled after a senior Lloyds executive claimed the bank had no evidence of criminality until the fraudsters’ trial began in 2016.

The small business customers who uncovered the fraud, Paul and Nikki Turner, sent detailed allegations of fraud to the board of HBOS in 2007, attaching documentary evidence later used in the 2016 trial.

They sent further evidence to every member of Lloyds’ board in 2009. At the time Lloyds dismissed their evidence and instead spent large sums on lawyers seeking to evict the Turners.

Concern

It has also emerged that Lloyds conducted internal reviews into the conduct of Mr Scourfield and others as far back as 2006.

In April, Lloyds Banking Group appointed Dame Linda Dobbs, a former high court judge, to review the bank’s handling of the fraud, which took place from 2002-2007, in the years before the trial in 2016.

During this time the bank consistently refused to say anything in public or acknowledge criminality. However, victims of the fraud have not yet been contacted in relation to the review.

MPs say they’re concerned the bank’s compensation scheme lacks transparency and independence. The bank will not show victims who is deciding their compensation offer, or reveal how it is worked out.

‘Suspicion’

Lord Cromwell, chair of the all party parliamentary group on fair business banking, said: “There appears to be a lack of transparency, and therefore a lack of public confidence, in the processes set up unilaterally by Lloyds for assessment and settlement of claims.

“Inevitably this creates suspicion and we are hoping that Lloyds will now accept our repeated invitations to make the processes – including the nuts and bolts of valuing claims – far more open to assessment by victims and their advisers. Without that it is hard to see how this matter can end other than in bitterness and litigation.”

Shadow business minister, Bill Esterson, said: “The victims of the HBOS Reading Fraud deserve to be treated in a fair and transparent manner. It is clear from the concerns that have been raised with me that this is not happening, and the Bank must be held to account.

“Any process of compensation must be transparent and beyond reproach, yet the details of the scheme as described to me provide no comfort that this is the case.

“Businesses in the UK deserve to have confidence that we are doing everything we can to support them when things go wrong, and it appears to me that there is a massive systemic failure when Banks are allowed to be their own judge, jury and executioner behind closed doors. This must change.”


Sports Direct profits dive by nearly 60%

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Profits at Sports Direct have plummeted nearly 60%, which the firm says is largely due to the weaker pound.

Underlying pre-tax profit fell to £113.7m, down from £275.2m last year, because of “currency movements and increased depreciation charges”.

Chief executive Mike Ashley said it had now taken steps to “minimise the short-term impact of currency volatility”.

Sports Direct’s reputation has been badly hit by revelations about staff conditions at its Derbyshire warehouse.

Chairman Keith Hellawell said the company had made “positive progress” across the business as it continued to “strive to ensure that all of our people are treated with dignity and respect”.

A recent survey of workers in Shirebrook, to which 3,300 people responded, had showed that an “overwhelming majority” of people in the warehouse “currently feel they are treated with respect”, he added.

Staff had elected the company’s first UK workers’ representative and Mr Hellawell said he had “no doubt” their “contribution will prove invaluable to the board as the Sports Direct family continues to move forward together”.

‘Selfridges of Sport’

Sports Direct, which has been without a chief financial officer since last October, also said it had appointed Jon Kempster to the role. Mr Kempster is set to join the company on 11 September.

The company’s key strategy is to turn itself into the “Selfridges of Sport”, and Mr Hellawell said the “elevation of our retail proposition continues to be a key objective”.

The results statement announced that it was forming a “new strategic partnership” with sportswear firm .

The Japanese company will manage dedicated areas within Sports Direct’s new upmarket “premium” stores.

Neil Wilson, senior market analyst at ETX Capital, said this was a “transformational” year for Sports Direct.

Progress was being made on the new premium stores, he said, and they were “a lot more profitable than the existing Sports Direct stores”.

In recent months, Sports Direct has bought 26% stake in Game Digital, increased its stake in Debenhams, acquired lingerie firm Agent Provocateur and snapped up the US sports clothing and outdoor equipment chains Bob’s Stores and Eastern Mountain Sports.

The company’s “spending spree on acquisitions” had affected profits, Mr Wilson said.

“That’s something to bear in mind when we’re looking at these figures and also what that does is it puts Sports Direct in a better position to make a strategic move in, for example, the department store area or in the US with its US acquisitions.”


Hacks ‘probably compromised’ UK industry

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Some industrial software companies in the UK are “likely to have been compromised” by hackers, according to a document reportedly produced by British spy agency GCHQ.

A copy of the document from the National Cyber Security Centre (NCSC) – part of GCHQ – was obtained by technology website Motherboard.

A follow-up by the BBC indicated that the document was legitimate.

There have been reports about similar cyber-attacks around the world lately.

Modern, computer-based industrial control systems manage equipment in facilities such as power stations.

And attacks attempting to compromise such systems had become more common recently, one security researcher said.

The NCSC report specifically discusses the threat to the energy and manufacturing sectors.

It also cites connections from multiple UK internet addresses to systems associated with “advanced state-sponsored hostile threat actors” as evidence of hackers targeting energy and manufacturing organisations.

According to Motherboard, one line in the document reads: “NCSC believes that

due to the use of widespread targeting by the attacker, a number of industrial control system engineering and services organisations are likely to have been compromised.”

Spate of attacks

A spokesman for the NCSC did not confirm nor deny the contents of the document cited by Motherboard.

“We are aware of reports of malicious cyber-activity targeting the energy sector around the globe,” he said in a statement.

“We are liaising with our counterparts to better understand the threat and continue to manage any risks to the UK.”

The case had the hallmarks of an attack orchestrated by a nation state, said security expert Mikko Hypponen at F-Secure.

“I can easily see an intelligence agency being tasked with the mission of creating a foothold in energy distribution systems in case it is needed during a crisis or conflict,” he said.

There had been a spate of such cases recently, said Ruben Santamarta, principal security consultant at cyber-security company IOActive.

“It’s not a very targeted attack, it’s affected a lot of countries, a lot of different companies,” he told the BBC.

“It doesn’t mean that someone is going to use these capabilities to turn off the lights in our cities in the near future, but it’s interesting that they are trying to get those capabilities.”

Hackers have also affected Ireland’s Electricity Supply Board (ESB), according to a report in the Times on 15 July citing anonymous sources.

The newspaper noted that industrial control systems at ESB were implicated, which could mean parts of the electricity grid in Northern Ireland were made vulnerable.

And in the US earlier this month, it was reported that hackers had gained access to a company in charge of a nuclear power plant in Kansas.


Households due £285 rebate on fuel bills, says Citizens Advice

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Every household in the UK should get a one-off rebate of £285 on its fuel bills as a result of excess industry profits, Citizens Advice has said.

Over eight years, it claimed firms that transport gas and electricity – so-called energy networks – have made £7.5bn in “unjustified” profits.

It blamed the regulator, Ofgem, which sets industry price controls, for “errors in judgement”.

Ofgem disputed the claim and said it had already helped to lower fuel bills.

Citizens Advice said that network firms had enjoyed a multi-billion pound windfall at the expense of consumers.

As an example, Citizens Advice said National Grid had made an operating profit of more than £4bn in 2015/16.

However the company’s annual accounts show that around a quarter of that profit was made in the US or on other activities.

Complaints

“Decisions made by Ofgem have allowed gas and electricity network companies to make sky-high profits that we’ve found are not justified by their performance,” said Gillian Guy, head of Citizens Advice.

“Through their energy bills, it is consumers who have to pay the £7.5bn price for the regulator’s errors of judgment. We think it is right that energy network companies return this money to consumers through a rebate.”

Ofgem sets the charges that network companies like National Grid, SSE and Cadent – which distributes gas – can levy in any eight-year period.

That is because they are monopoly operators.

But in the current period, lasting from 2013 to 2021, Citizens Advice says Ofgem has been too favourable to the companies’ interests.

It claims that Ofgem:

  • overestimated the risks for investors in the networks, costing consumers £3bn
  • assumed interest rates would be higher than they turned out to be, costing consumers £3.4bn
  • rewarded companies that inflated cost estimates for projects, costing consumers £1.1bn
Cheaper costs

However, Ofgem said a number of the assumptions used by Citizens Advice were too high, and rejected the idea of a rebate.

“We do think they raise some valid points, but we don’t agree with their modelling or their figures,” said Jonathan Brearley, Ofgem’s senior partner for networks.

On Wednesday Ofgem also announced a consultation on how it should set price controls after 2021.

“We will take some of the issues into account when we examine future price controls,” Mr Brearley added.

He told the BBC that those controls are likely to be much tougher on the companies involved, providing downward pressure on bills.

At the moment, around a quarter of the average fuel bill is taken up by transmission charges.

The Energy Networks Association – which represents the operators – also said it did not agree with the modelling used by Citizens Advice.

It said a similar claim filed by British Gas had already been rejected by the Competition and Markets Authority (CMA).

 


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