The Scottish law firm which criticised the banking review of mis-sold small company loans has said an English court judgement could allow disgruntled firms a new avenue of redress.
MBM Commercial says the High Court ruling that a bank’s conduct in the interest rate hedging product review is open to legal challenge effectively reopens a swathe of time-barred cases against banks.
Cat McLean, partner at MBM, told The Herald a year ago that the review conceded three years ago by the regulator had not been independent, as it had “put the banks in charge of reviewing their own wrongdoing”.
The review wound down earlier this year having paid out £1.8bn to 14,000 small businesses. In February the campaign group Bully Banks said it would petition for judicial review of the scheme, and in April nursing home operator Holmcroft was granted permission to apply for review.
Now holiday park operator Suremime has been allowed by an English judge to challenge the compensation awarded by its bank Barclays, which it says is inadequate. Barclays has declined to comment.
Ms McLean said: “It is now possible to argue that a bank breached its duty of care to carry out the review process fairly and reasonably. An awful lot of people in Scotland wanted to raise proceedings but couldn’t because they were time-barred, as they took out their swap in 2005 or 2006. This judgement might open up the possibility of suing a bank in a Scottish court.”
Although the £1.8bn review pay-out included £365m for consequential losses calculated at a standard rate, only £8m was paid out on bespoke claims for bigger losses. Many small firms were categorised as risk averse, through questionnaire answers, leading to a minimising of assumed losses. Over 11,000 firms were excluded from the review as being ‘sophisticated’ users of exotic derivatives.
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