MPs today lambasted a banking chief over ‘sham’ letters to lenders that purported to be from a solicitor’s firm.

The Commons Treasury Select Committee grilled Lloyds Bank’s Tim Hinton, managing director of SME banking, at the start of today’s evidence session on lending.

Chair Andrew Tyrie questioned Hinton three times about whether letters sent by Lloyds, which began with ‘We are solicitors who act for Lloyds Bank’, were misleading. The Gazette was first to reveal earlier this month that Lloyds had sent letters to indebted customers using the name ‘SCM Solicitors’.

The story came on the back of payday lender Wonga admitting to using fake firms to write to people in arrears.

Hinton said customers would not automatically assume the letter to be from an independent solicitors firm rather than a team of in-house lawyers. He added that a footnote explained the relationship of the ‘firm’, which was dissolved in 2011, to Lloyds.

But Tyrie said people were entitled to feel ‘aggrieved’ by the letters, before members of his committee began a sustained criticism of the practice.

‘Clearly this is a sham,’ said Conservative MP Mark Garnier. ‘A very well-constructed figleaf to make it look as if this is an independent solicitors and you have got by on the minimum amount of standard disclosure you can.’

He asked Hinton: ‘Are you comfortable standing up on behalf of Lloyds explaining this is a valid and legitimate practice?’

Labour MP Andy Love said the letters showed a ‘lack of transparency and clarity’ – a charge which Hinton denied.

His Labour colleague Pat McFadden added: ‘The purpose of the letter is to communicate to the customer this [matter] has now been passed outside the bank.

‘It was fundamentally misleading – that was the drive of the letter.’

Tyrie added that the letter was ‘calculated to mislead’ and said Hinton was the ‘only person in this room who has looked at the material and come to a different conclusion’.

Lloyds took the decision to stop sending letters with the SCM heading last year, although Hinton said it had taken some time for them to come out of circulation.

He added: ‘These are cases that are at the end of a long recovery process. At certain stages I would have approved it. We are trying to get to a conclusion.’

Meanwhile, it has emerged that Tyrie has written to four leading banks in the UK – Lloyds, HSBC, Barclays and Royal Bank of Scotland – asking how many letters of this kind they sent and the reasons for doing so.

Tyrie’s questions include asking whether the banks consider that these letters have been ‘misleading’ to customers.