CMS Banking Disputes Report 2024

Key findings of the 2024 report:

• The Banking and Finance sector had the highest volume of new High Court claims filed in 2023. This trend continued into Q1 2024. A high volume of claims in the Banking and Finance sector is not uncommon (the sector tends to compete for the highest volume of claims each year with the Professional Services sector and the Construction sector). However, the volume of claims filed in 2023 in the Banking and Finance sector was the highest volume since Solomonic started tracking data in 2014. The claims data includes claims filed against banks and other financial institutions, as well as claims filed by these parties.
• The claims data for 2023 demonstrated the “long tail” of market events with claims still being filed following the collapse of Lehman Brothers in 2008. In contrast, there is also evidence of a more recent trend: claimant law firms looking to file claims quickly after market events to establish a reputation as the lead claimant firm on a matter.
• The Financial Ombudsman Service (FOS) has reduced pending complaint volumes and wait times for decisions over the last year. In 2024, the FOS is expecting a rise in complaints of fraud, irresponsible lending, and account closures, as well as the same (high) volume of complaints regarding motor finance commission payments as in 2023.
• Use of the British Banking Resolution Service (BBRS) by Small and Medium-sized Enterprises (SMEs) remains subdued and the future of the BBRS remains uncertain.
• Various interest groups are calling for a new banking dispute resolution tribunal to be formed to allow SMEs to determine banking disputes without having to incur the often significant legal costs associated with High Court proceedings.
• Arbitration is consistently used by the Banking and Finance sector to determine disputes. Data from the London Court of International Arbitration shows that the Banking and Finance sector has accounted for 25% of its total caseload on average over the last six years.

High Court claims filed in the UK involving banks over the last year included:

• A high number of claims brought by litigants in person against retail banks.
• Various claims related to Norwich Pharmacal/Bankers Trust disclosure orders seeking information from banks to trace the flow of funds following fraud. 
• Numerous claims under guarantees, including personal guarantees, where the principal obligor has defaulted.
• Multiple claims for differing types of relief where banks have frozen a customer’s account and/or purported to end the banking relationship. For example, injunctions were sought to compel banks to complete a compliance review and give access to funds held, as well as to restrain a bank from terminating a customer’s contract. Claims were made for restitution for failure to release funds to customers; damages for closing an account without notice; and breach of mandate for failing to pay out funds on instruction. 
•  Various examples of “follow on” claims brought against banks based on regulatory findings. 
• Claims that alleged fraudulent misrepresentation against banks. In one case, a participant in a syndicated loan arrangement alleged fraudulent misrepresentation against an investment bank as the original lender and arranger of the syndicated loan.
•  Various examples of claimants (often litigants in person) seeking to claim that mortgages were void, requiring the repayment of sums paid to the bank during the life of the mortgage.

 Our report takes a deeper dive into the following UK banking litigation hot topics for 2024:

• Debanking – the claims data for 2023 show claims filed in the High Court after the termination of a customer banking relationship. This follows a high-profile debanking scandal in the UK in 2023. However, a 2024 High Court judgment addressed some of the challenges faced by such claims.
• Class actions – class action risk is on the rise generally across Europe and banks continue to feature in pending claims across all available UK class action regimes. This trend is very likely to continue throughout 2024 and beyond.
• Motor finance commission claims – motor finance secret commission claims are increasing in the UK and 2024 will be an important year in defining whether these claims are viable and shaping where and how such claims are to be determined.
• ESG litigation – ESG litigation action against banks and other financial institutions in the UK are in the early stages. As we move through 2024 and into 2025, the FCA is likely to take some form of regulatory action under anti-greenwashing rules about to be introduced and litigation either via activists or claimants seeking commercial returns.
• The future of the Quincecare duty – important case law in 2023 narrowed the boundaries of claims based on a breach of the Quincecare duty (i.e. a bank’s duty to refrain from processing a payment instruction if inquiry of the payment reveals fraud to the customer). However, we are likely to see a continuation of these claims in 2024 and beyond, and therefore we look at the available judicial guidance on what might amount to red flags for putting a bank on inquiry of potential fraud and how claims might be reframed on the basis of an alleged “retrieval duty” (i.e. a bank’s duty to try promptly to recover payments that have been made pursuant to fraud). 
• Redress schemes – following the public and political spotlight placed on redress schemes in the UK in 2023 and into 2024 as a result of the Post Office/Horizon scandal, we look at the 2023 report by the All-Party Parliamentary Group on Fair Business Banking into redress schemes and what a good scheme looks like from a consumer’s perspective. 

For further information on the above topics, please download our full report.