17 February 2021
Banks are being encouraged to adopt 'model litigant principles' when conducting disputes with customers by the All-Party Parliamentary Group (APPG) on Fair Business Banking. The APPG said the introduction of "fair, honest and mandatory" principles which enforce good faith would be a "first step in driving change"1.
The APPG made the recommendation to the FCA in a recent letter, alongside a recommendation to introduce "strict and substantial financial penalties (payable to the customers) where the bank has deliberately delayed, obfuscated and caused further detriment when it knows it is in the wrong". The APPG claims that for over ten years banks have done "everything in their (quite extensive) power to deflect, deny and delay dispute resolution" and comments that whilst setting up the Business Banking Resolution Service was a step in the right direction, a wholesale (enforceable) requirement for banks to act in all their disputes with clear guidelines would be a "seismic shift".
The concept of 'model litigant principles' comes from Australia. Originally aimed at disputes involving the government, following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the largest Australian banks adopted the principles. See for example those of the Commonwealth Bank of Australia here.
The core principles of the rules are:
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acting honestly, consistently, and fairly in the handling of claims and litigation;
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dealing with claims promptly;
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making an early assessment of the litigants’ prospects of success;
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paying legitimate claims without litigation;
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not taking advantage of a claimant who lacks resources;
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not relying on a merely technical defence against a claim; and
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considering alternative dispute resolution (ADR) options.
In advocating that a similar approach be taken in the UK, the APPG speaks highly of the impact the principles have had on the banking sector in Australia, claiming that they have changed the way banks in Australia see their customer interactions "forever"2.
The reality, however, may well be less remarkable given that, generally speaking, the principles seem to be in line with the approach that banks should already be taking in dealing with customers, not least because of their regulatory obligations to pay due regard to the interests of their customers and treat them fairly. Time will tell whether the Australian example is followed in the UK and, if it is, the impact the introduction of 'model litigant principles' has in practice.
For further information, please contact:
Lynn Dunne, Partner, Ashurst
Lynn.Dunne@ashurst.com
.
