Member Article

North West business partners lose RBS mis-selling case

Two North West-based business partners have lost a landmark interest rate swap case against the Royal Bank of Scotland (RBS), who now face accusations of “dragging their feet” to exploit a six-year limit on claims.

Blackpool-based hotelier Paul Rowley and his partner John Green, who is an estate agent, lost an appeal on Monday against a judgement made in June, which said they were not entitled to compensation from RBS after they claimed they had been mis-sold financial products by the bank.

The Appeal Court threw out the case because of a six-year limit on mis-selling claims under breaches of regulatory guidelines.

Jon Green of Clarke Willmott LLP, the solicitors instructed for the appeal, stated: “Albeit we were not instructed at first instance, we were surprised by the finding in the initial judgment that no advice was provided. In our experience, it is very unusual for complex financial products to be sold without advice.

“We are very disappointed by the outcome. That said, it is as a result of the specific facts of this case and of limited wider application. The FCA has given a clear steer of the standard of explanation that would be required on the breakage costs under the COBS Rules and we would expect that to be upheld in an advice situation.

“We will await the Court of Appeal’s written judgment in the autumn on the extent in an information only situation to which the COBS Rules sound in a common law duty of care. We would hope and expect that any COBS Rules which governed information situations would be applied by any financial adviser exercising a reasonable standard of care.”

Seneca Banking said the banks are purposefully delaying procedures to prevent having to pay out.

This is the first case of interest rate swapping to go to full trial in England, and the decision has implications for small and medium-sized businesses who have accused Britain’s banks of selling financial products which have cost them huge and unexpected charges.

Daniel Fallows of Seneca Banking Consultants said: “Every day businesses are losing the right to take legal action because of the six-year rule.

“The banks appear to have been delaying, denying and stonewalling to run down the clock. We would ask the FCA to publicise how many settlements have been agreed by the banks and paid within the past 12 months. We believe the figure is derisory.”

Seneca have since written to the Financial Conduct Authority (FCA) to raise their concerns about the banks “dragging their feet”.

In open letter to FCA chief Martin Wheatley, Seneca criticised the justice process as slow, formulaic and lacking in transparency.

Mr Fallows continued: “It’s abundantly clear from the studies the regulator has carried out that UK business was on the end of a lengthy epidemic of bank mis-selling. Yet the route to justice is still controlled by the banks.

“If you go through the FCA’s compensation scheme, there are arbitrary limits governing who can seek compensation, restricting justice to businesses with a relatively modest turnover.

“And even on this path, it’s not at all clear what a business could do if it didn’t like the settlement it was offered by a bank.

“The complexities of the Green and Rowley case highlight the difficulties which face companies resorting to direct litigation.

“For companies which take the direct litigation route, it’s important that whoever is handling your claim is a specialist and has genuine depth of knowledge when it comes to understanding breaches of banking regulations. Significant resource is required to provide the specialist analysis and support needed.”

Seneca is advising over 200 businesses across the North West, Yorkshire and the Midlands, where they have regional office bases, across a range of sectors including farming, property and care homes.

RBS is part of a Financial Conduct Authority-led redress programme for victims and, along with other major lenders, has set aside £750m to compensate victims.

Barclays has made the largest provision, at £850m, and is expected to set aside hundreds of millions of pounds more on Monday to cover the growing number of claims against it.

It is thought the total bill for banks could come to more than £10bn, while FCA has established a compensation scheme for businesses, although some firms have resorted to legal action against the banks due to the six-year limit on suing for breach of contract.

This was posted in Bdaily's Members' News section by Miranda Dobson .