The FCA: 20 Months On

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Posted in:Banking and Finance|December 17, 2014 | Join the mailing list

On 9th December 2014 the FCA issued a press release.  It is re-organising, restructuring and re-focusing.  Sounds positive?  We thought so.

Berg has critically appraised the role and operations of the FCA since it was formed in 2013.  We have stated that the FCA has failed SMEs across the country because it has failed to properly over-see the IRHP review process, and has supported the banks rather
than SMEs.

In September we issued a statement warning that the FCA could face Judicial Review. Read the
statement in full here.

We have seen over the last 20 months a steady stream of employees leave the FCA.  Many have gone to work at the banks, including some senior employees.  On 9th December 2014 the FCA announced another three significant people in influential roles are leaving.

The failures by the FCA in the review process have directly led to insolvency of people and companies and have even been linked with personal tragedies such as suicide, as set out by a debate of MPs on 4th December 2014. The debate by MPs was a sustained and
comprehensive criticism of how the FCA has dealt with the IRHP review.
Details of their
debate can be found here.

Where has the FCA failed??

The most significant losses that SMEs have had to deal with are those caused directly and indirectly by IRHP payments.  If a business loses £75,000 a year under the terms of an IRHP the loss of that money is very likely to have caused damage to the business. 
Unfortunately, the banks have informed the FCA that of the 29,000 IRHPs sold only £5 million of additional damage has been caused (over and above the 8% interest paid on each case).  That £5 million includes the extra tax liabilities incurred by SMEs receiving
redress in a lump sum.  In short, the Banks have stated that the IRHPs that crippled businesses did not in fact cause any damage at all except in a very small number of cases. This is incredulous.

Consider the FCA’s published statistics.  Very few SMEs have applied for consequential losses.  2,965 made a claim for consequential losses.  Of the 1,535 completed, 871 were turned down entirely and received nothing.  502 received less than £10,000.  Most
of the claims for tax that Berg has seen have been claims of less than £20,000.  We therefore suspect that the majority, if not all, of the 502 successes (receiving more than £1 and less than £9,999) were simply repayments of tax by the banks, and not true
consequential losses.  

Only 11 out of 29,000 companies or individuals suffered losses more than £100,000.  None suffered losses of in excess of £1 million or more.  Not one.

Why Does The Above Reveal Failures on The Part of The FCA And Why Did The MPs Criticise The FCA??

SMEs have said since the start of the Review process in 2012 that consequential loss claims will be the vast majority of a claim.  One report by DTZ stated that for property developers and investors alone this figure will be around £20 billion.  It has in fact
turned out to be £5 million.  £5 million yet prominent experts predicted it would exceed £20 billion.  Berg certainly expected the consequential losses suffered by a large number of claims to be in the millions, but with the majority being satisfied with the

In addition to this, we have seen the number of businesses receiving unfair, and at times misleading rejections, increase, added to which almost all RBS offers of redress since June 2014 have been offers of an alternative IRHP, meaning those customers receive
little or no cash and thus they have NO consequential loss claim.

When complaints have been put to the FCA by solicitors and MPs the FCA has stated universally that they are satisfied that the independent reviewer is independent enough to ensure that all claims are dealt with properly and in-line with the FSA’s and FCA’s
statements.  The FCA has received criticism because all practitioners and MPs know that this is not true.

We would recommend you also read
Berg’s briefing to MPs preparatory to the debate at Westminster on 4th December 2014.

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 Litigation Team on 0161 829 2599 or email him at

You can also download our
2014 Banking Report
, which digs deeper into why the SME Lending Landscape is a scary place to be at the moment.

(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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