Steer clear of CMCs, financial watchdog warns bank litigants
City regulator the Financial Services Authority has cautioned small business owners against using claims management companies (CMCs). The warning comes at the end of a damning report on the mis-selling of interest rate hedging products which highlighted banks’ ‘poor sales practices across a number of products’.
The report argues: ‘Customers do not need to use a claims management company because the process is straightforward.’ The Ministry of Justice regulates CMCs, which were prominent in managing payments protection insurance claims, and are now marketing themselves to business owners who bought interest rate hedging products.
The FSA report will provide ammunition to business owners who have been campaigning for the regulator’s intervention. The Gazette has covered the progress of business owners’ claims which have been defended by the banks.
The FSA said it had reached agreement with Barclays, HSBC, Lloyds and RBS over a "redress" scheme. However lawyers warned that the scheme will not satisfy all potential litigants.
M Ali Akram, partner at LEXLAW Solicitors & Advocates, said: ‘The FSA redress scheme, which will not necessarily result in settlement for victims of mis-selling, does not take account of the contractual limitation period of six years which for many cases has either expired or is about to expire.’ Those sold derivatives in 2005-2006 could be left without redress.
There is no automatic refund set out in the FSA scheme, and the regulator’s statement admitted ‘appropriate redress’ could include a ‘partial refund’, or renegotiation of a business’s credit and product arrangements.
Excluded from the scheme are ‘sophisticated customers’, defined with reference to the business’s turnover, balance sheet and number of employees.
- Read Ed's blog on the FSA