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
Comments
I can see the reason for not
I can see the reason for not instructing CMCs. For an SME it would simply be pointless.
I am slightly concerned that the rhetoric implies that because there is a scheme set up to compensate SMEs by the banks, this will be completely sufficient and above board. I have no trust whatsoever in the banks' intentions to pay all due and neither should any right-thinking person.
See a reputable commercial solicitor and let them handle it for you.
Your concern
Anon, you are quite right. I'll be writing along these lines later, having spoken to lawyers and expert witnesses who have now had time to read what is proposed.
Banks and compensation
The banks will have a field day on this as they have on every compensation debacle that we have had over the past few years. They will tie up the SME's in knotts and with no one to help them, the SME's will get stiched up again. The FSA should stop barking at the wrong target, its the banks who are to blame.
This is on a par with, "you
This is on a par with, "you won't need a lawyer to get you compensation, because the insurance company will pay you anyway" or "you don't need a lawyer if you are innocent."
No it isn't. No-one EVER
No it isn't.
No-one EVER needs to use a CMC (CMC's are mere introducers which take a fee for directing the client to a lawyer)-but if they are engaged in litigation it would be wise to use a litigator.
CMCs
Indeed - people do not have to and should never use CMCs except perhaps in exceptional cases. In the most part they are a complete waste of space and most right minded people agree. For example that is one rare issue, the ABI and the Law Society actually agree on.
The banks are to blame for this. I predict the reputation of some banks is going to be dragged through the gutter for their appalling behaviour. The press are going to have a field day and even the FSA will be forced into standing up for and taking steps on behalf of customers who have been ripped off.
Banks are systematically destroying the wealth of people and businesses. For example, this week, RBS initiated a futile attempt to dispute an application made by a car hire company to be allowed to see evidence of systematic fraud by a company called Autofocus, a party involved in the handling of motor claims. RBS did not want to release this evidence because it might reveal the fact claims were settled incorrectly and the hire firm could potentially claim reimbursement from insurers who never should have received some settlements. RBS lost that hearing in the High Court and shot themselves in the foot again as their reputation will suffer more and more for trying to deprive businesses of seeking proper redress.
As for whether the FSA are right that claiming is straight forward, I could not comment in this case as I do not know about the product or the circumstances. All I know is that generally most straight forward claims (PPI being one example) do not need a CMC or a solicitor. It may well all be all the banks fault but that does excuse the past behaviour of CMCs for trying to exploit these types of situations. The amount of recent CMC closures suggest they were as guilty of conning customers as the banks were. And not to mention the fraud they conducted in submitting bogus claims to banks and insurers (thus giving ammunication to say CMCs and lawyers are all ambulance chasers).
I believe solicitors would be well advised to choose their work and battles wisely and not become embroiled in the feeding frenzy we often see in the aftermath of these scandals. This particular scandal is going to be very ugly and the legal profession might see this as an opportunity to go on a charm offensive and improve its reputation in the eyes of the public.
Redress
'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'.
The above is one section of the article. Are perhaps the comments of the partner above rather premature or not entirely realistic? The redress scheme might not mention derivatives sold more than 6 years ago but who says the banks are going to rely on limitation in this case? Obviously a matter that needs clarification but it does highlight the need to take one thing at a time before going down the road of litigation.
The other thing to mention is that I think an FSA spokesman did say some of these products were appropriately sold. If that is the case then surely the FSA redress scheme is not going to recommend a blanket redress system.
Re: Redress
I'm a small landlord with my wife and we have a loan with swap from Natwest and RBS. We had no idea it would cost us anything at all yet all the time for 4 years I am paying out more money. Why can't this be stopped immediately? Why should we wait while Natwest/RBS consider things? The BBC says they may use big accountants as theyre meant to be independent but they really actually work for the banks and the FSA. I've frankly had enough of this and I really want to stop paying and start fighting as do most victims and I don't want to lose the chance to sue Natwest/RBS either. This report from the FSA is a beginning of the fight to be properly repaid and the swap cancelled.
Bully-Banks has over 400 members who are victims of the Banks
www.bully-banks.co.uk