Consequential Loss: mis-selling payments branded as ‘ridiculous’

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Posted in:Banking and Finance|July 9, 2014 | Join the mailing list

The Times has published an article today referring to the FCA review’s consequential loss payments.  On Monday 7th July 2014 the FCA updated their
website and included
a new page that sets out consequential loss claims.

FCA update on consequential loss claims

It states that there have, to the end of June, been 2,060 consequential loss claims, 400 of which have been successful.  £700,000 has been paid to those successful applicants.  That equates to an average of £1,800 each.

Why has this been branded as ‘ridiculous’?

We have one client that has made a consequential loss claim to Barclays.  Barclays refused the claim.  Another one was submitted, and this too was refused with no explanation of why other than “your claim does not meet the very high test set by the FCA”. 

The FCA will not do anything about this, but simply state that they have every confidence that the independent reviewer would stop any abuses.  Their claim was for circa £600,000.  Indeed, the smallest consequential loss claim we have seen was for £56,000.
 

DTZ, a well-respected property management company, estimated that, for property development companies alone, payments under the review, inclusive of consequential losses, would amount to £10 billion.  That did not take account of the other business types in
the review.

It seems to us that something has gone seriously wrong.  The review has paid out £1.5 billion on direct redress and £700,000 on consequential losses.  We suspect that the vast majority of that £700,000 must be accounting for one individual, and the remainder
of the 400 “successful” applicants had simply had double or triple digit refunds of fees and charges, which the review would class as a successful consequential loss claim.  It would also take account of the additional tax payments that banks must make.

We would therefore advise a word of caution.  Most consequential loss claims are in excess of £100,000, with a large amount being in excess of £500,000.  “Consequential loss claims” in the review include refunds of charges and fees and where the bank pays the
additional tax liabilities created by being paid redress in one lump sum rather than over the years.  It therefore appears quite apparent to us that it is unlikely that most successful applicants actually succeeded on a substantive consequential loss claim,
with the majority succeeding on small cases, or it oculd be even worse and each of them only succeeded in double or triple digit payments with one or two businesses getting a large win.

What do we want …?

We would like the FCA to include in their figures the number of people who had a flat out rejection with £0.00 paid.

We would like the FCA to include separately in its figures the number of cases who received a consequential loss claim of £10 to £1,000, the numbers who received £1,001 to £10,000, those that received £10,001 to £250,000, and the numbers for those that received
in excess of £250,000 and those in excess of £500,000.

We would also like the FCA to show the figures by the bank, because we are instructed by more Barclays customers who have had a rejection than any other bank.

For more information about any of the above or for practical advice on this or any other aspect of banking and financial disputes, please contact
Kalvin Chapman of the Berg Banking team on 0161 829 2599 or email him at
KalvinC@berg.co.uk

The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice should
be obtained before taking, or refraining from taking, any action as a result of this article.

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