| Financial services warned of class action |
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| Thursday, 08 May 2008 | |
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Financial services firms have been warned to keep a close eye on a class action-style lawsuit.
The news that consumers are being urged to join a lawsuit against HFC Bank, following an FSA fine for mis-selling payment protection insurance, will bring greater focus to whether a US-style litigation culture is set to take root in the UK. High-profile cases According to financial services litigation experts at international law firm Eversheds, the sector should watch the case with interest, although recent attempts to bring collective actions in the UK have been met with some resistance from consumers. In recent months, there have been moves to introduce a pan-European system of consumer redress, allowing people to bring claims against companies which have admitted to wrongdoing. High-profile cases, such as the one launched by consumer watchdog Which? against sportswear retailer JJB Sports in 2007 following a fine for fixing the price of footballs shirts, however, have cast doubt as to whether class actions will really take hold on the UK. In this instance, only 600 of the estimated one million people who bought shirts joined the action, which settled in January 2008. Limited success Chris Busby, financial services litigation partner at Eversheds, says that the claim being brought against HFC Bank, which was fined by the FSA earlier this year, is an interesting one as it is the first against a financial services company. "The limited success of recent attempts to bring class action-style claims against companies means, however, that the outcome of this latest case is far from certain. There has been much speculation about whether class actions will ever take root in the UK, but it is highly unlikely that a US-style system will become a reality," Busby adds. He warns that this makes it very difficult for claimant firms to successfully pursue a case in the UK as consumers have to actively ‘opt-in’ before the case can proceed. Bushby says that the claim against HFC may be even more difficult to pursue, as a lawsuit of this type has yet to be brought following an FSA ruling. Complaints assessed individually "It may be that this approach is not necessarily the best way to resolve any potential complaints from consumers, as each case is very different, being about the particular needs of the customer buying the product and what was said to them at the time it was sold," he notes. Bushby explains that it does not therefore follow from the FSA decision that every policy must have been mis-sold. Complaints need to be assessed individually through a complaints process and ultimately by the Financial Ombudsman Service or the Courts. Therefore, he believes that a ‘one size fits all’ collective action is not appropriate in cases of this type. “That said, this case is breaking new ground, and should be monitored by the sector – if successful, it could pave the way for similar high-value claims by victims of mis-selling.” Related articles
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