The BBRS is intended to fill the access to justice gap for banking claims which are too valuable for the Financial Ombudsman Service (FOS) but not valuable enough effectively to litigate at Court. The BBRS is supported by the UK’s leading banks and gives every indication of being a positive step for business banking customers.
Having said that, conception is one thing, execution another. This post discusses the key features of the BBRS, its genesis, aspirations and some of the factors that will influence whether it will be a success.
Which banks are participating?
The BBRS is backed by the UK’s largest banks: Barclays, Danske Bank, HSBC, Lloyds Banking Group (including Lloyds Bank and Bank of Scotland), NatWest Group (including Royal Bank of Scotland, NatWest and Ulster Bank Northern Ireland), Santander and Virgin Money (including Clydesdale Bank and Yorkshire Bank).
Which customers are eligible to participate?
Any of those banks UK customers who are eligible can submit a claim; non-UK customers are not entitled to use the scheme.
Eligibility is determined in two ways:
- A “contemporary” scheme – where the acts complained of occurred from 1 April 2019 onwards – for businesses whose turnover does not exceed £10m per annum and total assets are no more than £7.5m.
- A “historical” scheme – where the acts complained of occurred between 1 December 2001 and 31 March 2019 – for businesses whose turnover did not exceed £6.5m per annum and total assets were no more than £5m.
In each case, there will be no eligibility if the complaint can be dealt with by FOS, which can be accessed by businesses with turnover up to £6.5 million and fewer than 50 employees.
However, the BBRS has indicated it can be flexible as regards eligibility for cases which are on the boundaries of the thresholds.
What does the process look like?
The precise process that the BBRS will follow appears to be under review still and may be adjusted based on feedback from users. However, it appears the key features will be as follows:
- The process will take the form of conciliation, mediation and adjudication (not arbitration or another determinative legal process).
- The BBRS say “our ambition is that your case is resolved between you and your bank during the complaint assembly stage” – from this it looks like early conciliation or mediation is the BBRS’ preference, with adjudicated awards only being issued if that fails.
- By making complaints, users do not give up their rights to bring Court claims, but equally do not stay limitation or achieve a moratorium on a Court claim.
- Users will not need to be legally represented but will supported by “Consumer Champions” provided by the BBRS.
- Adjudicators will be drawn from legal backgrounds and are being given training on banking law and finance issues.
What awards can be issued?
The BBRS have stated that awards will be issued by BBR adjudicators on a “fair and reasonable” basis, “taking into account all relevant information available”.
Awards can be financial or non-financial. For financial awards, there are caps of:
- £600,000 for complaints under the contemporary scheme; and
- £350,000 for complaints under the historical scheme.
However, the BBRS have indicated that adjudicators can issue recommendations that banks pay awards above these levels, and that they expect banks to honour those recommendations.
The BBRS has a long genesis in the banking scandals of the last 20 years including PPI and IRHP mis-selling, the actions of RBS’ Global Restructuring Group and the HBoS Reading fraud.
Consumer stakeholders such as the All Party Parliamentary Group on Fair Business Banking and the SME Alliance identified that SME customers frequently had legitimate claims against their lenders that could not be pursued effectively in Court. They commissioned research (to which I was invited to contribute) supporting the idea of a specialist financial services tribunal to solve this problem.
Meanwhile, the banking industry, via UK Finance, commissioned the Walker Report which endorsed this conclusion. There was a widespread recognition that redress schemes operated by the banks themselves had not been viewed as sufficiently independent, and left customers unhappy.
The BBRS is the result of all of that work. It is an important and positive step towards having access to justice for bank customers. It will allow customers to pursue the type of medium sized claims that would never be worth the expense and risk of adversarial Court proceedings. The quality of the BBRS team should give customers confidence that they will receive expert guidance and assessment. As I reasoned in an article for The Times in 2019 (subscription only), companies need the level playing field which hopefully the BBRS will provide.
Having said that, medium sized claims can nevertheless raise complex factual, technical and legal issues. The BBRS will need to address a wide range of issues, from financial product mis-selling, to phishing and APP scams, and the consequences of loan defaults and insolvency. One of the common issues encountered by users in previous redress schemes was that, whilst told they did not need legal representation, in fact they faced banks with in-house advisers and who outgunned them on complex claims. The BBRS’s Consumer Champions and adjudicators will need to be alert to this imbalance of expertise.
To an extent, the BBRS’ fair and reasonable decision making should cut through that issue. However, that is a double-edged sword. Users have felt that despite FOS’ similar fair and reasonable approach, on occasion FOS adjudicators have failed to address the substance of complaints. That is an issue both for individual users, and a systematic problem because it inhibits the development a body of case law and precedent which future users can rely upon.
If the BBRS deals with these issues successfully, there will be a strong argument for extending its eligibility to encompass larger business, higher value claims and insolvency issues.