Consumer help desk

Earlier this week we heard from a Mr E. Daniels of London, an American, who runs a medium sized bank in London. Last year, he may have been missold another bank shown to him by a group carrying on business under the name of FSA. The group and their salesman, a Mr Brown, assured Mr Daniels that the purchase would not be a problem under the UK monopoly laws and in fact Mr Brown would personally see to it that that was so. Unfortunately, Mr Brown omitted to tell Mr Daniels about EU laws that also applied to the deal, and as a result Mr Daniels may have to make substantial disposals out of his expanded business to satisfy the bureaucrats in Brussels.

But Mr Daniels' problems didn't stop there. He realised quite soon that the business that he had bought was not in great shape and many of the acquired assets had to be written down to a more realistic value. In March of this year, Mr Daniels was approached by another group calling themselves HM Treasury selling their Asset Protection Scheme. As it turned out, this group was connected to FSA and the mysterious Mr Brown.

The details of HMT's Asset Protection Scheme were complicated but involved the payment of substantial fees to HMT, in return for which HMT would guarantee the value of financial assets, but only after the customer had taken a 25% first loss. It seems that the main intent of the scheme was not to provide guarantees for the assets but to cover the loans (already secured by assets) with 0% weighted guarantees to allow the the customer to free up capital.

Initially the proposal looked attractive, but after considering it in detail Mr Daniels realised that since he had already taken much of the 25% first loss on many of his assets and they were unlikely to fall much further, he had no use for the downside protection or the preservation of capital which made the fees quite expensive, although Mr Brown's colleague Mr Darling were constantly on the telephone to Mr Daniels that he needed to increase the capital in his business.

Last week, Mr Daniels decided that the Asset Protection Scheme was not for him and that he would seek fresh capital from the stock market. It was at this point that HMT told Mr Daniels that he have to pay a hefty £1 billion "exit fee", even though he had not actually signed up to their scheme. HMT argued that the very fact that Mr Daniels was interested in their scheme meant that there was some sort of insurance for his assets. Mr Daniels on the other hand says that he was only showing preliminary interest, and there was never any guaranteed protection for his assets.

We tried to get in touch with HMT but they were unavailable for comment. It is not certain that Mr Daniels signed any paperwork that would make him liable for any payments, but the message is clear: If you are approached to buy a large bank or to buy into one of these Asset Protection Schemes (and there are a lot of them around at the moment), be sure to consult a good solicitor first.

Mr Daniels is in touch with a leading London law firm. We'll let you know how he gets on.