The APPG is pleased that Simon Walker recognises the “massive power imbalance” between businesses and banks. His report clearly identifies that there is a limit to his proposals; which do not extend beyond a compensation limit of £600k, cannot compel witnesses, cannot force disclosure of information nor deal with insolvency issues. As such, it is clear that his proposals will provide a piece of the jigsaw, but taken alone, are not enough.
As previously stated in the past, the APPG welcomes the creation of a separate division of the Financial Ombudsman Service (FOS), which will have a clear business identity and the appropriate skill requirements. The opportunity for data monitoring and feedback to the FCA would be a useful tool to detect abusive behaviour and misconduct. Raising the limit from £350k to £600k is welcome, as is raising the turnover limit to £10m.
However, it is critical to note that in today’s climate, access to justice is not determined by the turnover of a business, but the quantum of a claim. The experience of the APPG, and of those who advise the Group, is that it is only at a claim size of £10m that litigation funding becomes feasible and competitive.
Kevin Hollinrake MP, Co-Chair of the All-Party Parliamentary Group on Fair Business Banking said: “I welcome the fact that the review has recognised the ‘massive power imbalance’ between business and banks. However, this solution does very little to bridge the ‘access to justice’ gap. Around 90% of cases we deal with would fall outside the scope of this redress mechanism as the settlement limit is £600,000. Combined with this is the fact that this extended ombudsman would not have powers of disclosure and could not compel witnesses to give evidence.
We are very concerned that this review has not properly considered the APPG’s Fair Business Banking for All report. It seems to criticise the tribunal solution, for instance that it does not deal with the legal basis for claims, when this is actually set out very clearly in the executive summary of our report.
Inexplicably, Mr Walker dismisses the Financial Service Tribunal as simply being ‘popular with politicians’, but it is also supported by senior members of the legal profession, many banks, the regulator and, most importantly, victims. I wonder how many victims have expressed support and confidence in Mr Walker’s proposals? Certainly, none that we have spoken to.
We simply cannot accept that this would provide the holistic dispute resolution scheme that is required to make sure we level the playing field between business and banks and will continue our campaign until we do deliver the right solution.”
- Limitations of an Ombudsman
The APPG is clear that businesses will have little confidence in the ability of any voluntary Ombudsman to be able to fairly and effectively settle life-changing claims and disputes. The decisions take place behind closed doors, by adjudicators who are not required to have any formal qualifications and who cannot compel witnesses and force the disclosure of information.
- Financial Services Tribunal
The proposals for a Tribunal are the only proposals that can deal with complex cases over a compensation value of £600k. The Tribunal is the only mechanism that can compel witness testimony and have full legal powers of disclosure.
The FST has the full support of the FCA. FCA Policy Statement PS18/21 section 2.9 states: “We have publicly stated our support for a tribunal that could deal with disputes that fall outside the ombudsman service’s remit. We see a role for both an extended ombudsman service and a tribunal, as they meet different needs. For example, the ombudsman service’s expertise lies in providing a quick and informal process for financial services disputes. A tribunal, on the other hand, would provide a more formal, court‑like approach for some higher value disputes, or disputes involving complainants above the ombudsman service’s eligibility thresholds. However, we do not have the power to set a tribunal up. This would require primary legislation and is therefore a matter for the Government”.
This is further supported by Andrew Bailey, CEO of the FCA, who said: “the ombudsman provides a quick and informal process for relatively low value financial services disputes. A tribunal, on the other hand, could provide a more formal, court-like approach for higher value disputes, or disputes involving complaints above the Ombudsman’s eligibility thresholds. The ombudsman does not have the power to compel the attendance of witnesses, take evidence on oath or test evidence by cross-examination.”
- Truth and reconciliation
The APPG agrees that there must be a process for truth and reconciliation and the Group will continue to call for a full public inquiry into the mistreatment of businesses at the hands of their financial services providers. This will be the only mechanism to provide thorough and robust truth and reconciliation. The terms of reference for any such mechanism must be agreed via a panel that includes the APPG and other key stakeholders
- Redress for past complainants
The APPG supports Mr Walker’s call for compensation for businesses that have been affected by past misconduct. Any system set up for compensation would need to be transparent, independent, and set up with a steering committee that includes the APPG and representatives of businesses.