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Banking Matters – Spring 2017

Banking Matters – Spring 2017

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Data subject access requests: Latest essential advice

The extent of a data controller’s obligations to respond to data subject access requests (DSARs), […]

The extent of a data controller’s obligations to respond to data subject access requests (DSARs), and in particular the interaction with legal privilege and litigation, has featured in a number of recent high profile cases. DSARs are increasingly being used tactically, both prior to and alongside the litigation process. As responsible data controllers handling often highly sensitive personal data, it is vitally important that all those operating in the retail financial services industry deal promptly and properly with DSARs.

Walker Morris’ Partner Louise Power, a specialist in retail financial services litigation and non-executive director of a local building society, reviews recent key DSAR judgments and offers her top tips for managing firms’ increasingly important risks and responsibilities.

DSARs – The rights in issue

The Data Protection Act 1998 (DPA) places an obligation on any data controller receiving a DSAR to provide individuals (or, data subjects) with a copy of their personal data and related information unless that is not possible or would involve disproportionate effort, or unless the data sought is privileged (or falls within another of the few limited exemptions). Data controllers may charge a maximum fee of £10 to cover the administration involved in complying with a DSAR and they must comply within 40 calendar days [1].

The extent of the data controller’s obligations when it comes to complying with DSARs has, however, been the source of some debate within the courts. The following key issues have now been addressed in recent cases:

proportionality of searches and the ‘disproportionality exemption’;
the extent and application of the ‘privilege exemption’;
the relevance (or not) of the motive for making the DSAR; and
the court’s discretion to compel compliance with a DSAR.

Proportionality

In Dawson-Damer & Ors v Taylor Wessing LLP [2] the claimants asked the court to compel the defendant law firm (TW) to comply with a DSAR made by the beneficiaries of a Bahamian trust. (The firm’s client was a trustee company and the DSAR was made in the context of an ongoing dispute between TW’s client and the beneficiaries.) Following a review of its files TW had refused to comply, simply citing that the data sought was subject to legal professional privilege.

Clarifying that the proportionality test applies not only to the actual copying and supply of information and documentation, but also to the level of the search that would be involved, the Court of Appeal stated that “the correct approach is to examine what steps a data controller has taken, and then to ask if it would be disproportionate to require further steps to be taken to comply with the individual’s right of access. The burden of proof is on the data controller to show that it has taken all reasonable steps to comply with a SAR request, and that it can rely on any specific exemptions to refuse to provide data“.

Finding for the claimants, the court also confirmed that there are substantial public policy reasons underpinning individuals’ DPA rights so that, where and so far as possible, DSARs should be enforced. The court stated that most data controllers are expected to understand their obligations to comply with DSARs and should have designed their systems to enable them to carry out searches to comply with DSARs relatively easily.

The Court of Appeal therefore indicated that it is likely to be a rare case in which the disproportionality exemption would apply.

In particular, in this case it was not sufficient for the data controller to simply make a blanket assertion of legal privilege in relation to its files; nor was it sufficient to assert that it was too difficult, costly or time-consuming to search through voluminous papers. TW had not provided evidence of the effort that it had carried out, nor the time, cost or indeed any plan of action that would be involved in complying with the DSAR. Neither had TW evidenced the basis on which it had reached its conclusions that the privilege exemption applied. The court held that TW had therefore failed to discharge its obligations as a data controller.

Privilege

Also in Dawson-Damer, TW tried to establish a wide, interpretation of the DPA’s privilege exemption. TW argued that the privilege exemption [3] applied not just to documents that were privileged under English law but also, by analogy, to those documents held by it which were restricted from disclosure by virtue of the governing law of the trust document in dispute (that was, in this case, Bahamian trust law). TW submitted that the substantive effect of the relevant Bahamian law was the same as legal professional privilege, even though it was not actually legal professional privilege.

Rejecting this wide, purposive construction of the DPA, the Court of Appeal concluded that the privilege exception relieves a data controller from complying with a DSAR only if a claim to legal professional privilege can be maintained according to the law of any part of the UK. (For further detail and practical advice relating to privilege generally, please see our earlier article.)

Another aspect of the privilege exemption has also been clarified recently in Holyoake v Candy & Anor [4]. Mr Holyoake claimed that Mr Candy had illegitimately relied on the privilege exemption to avoid a full response to Mr Holyoake’s DSARs (which were made in the context of an underlying dispute). Mr Holyoake attempted to rely on the ‘iniquity principle’ – that is, the principle that legal professional privilege may be disapplied if it is being used as cloak for crime or fraud.

Mr Holyoake alleged that the data/documents sought by him related to surveillance activities which Mr Candy had carried out against him which were tainted by criminal conduct, in that they breached Mr Holyoake’s data protection rights and/or his fundamental human right to privacy. Mr Holyoake argued that the alleged criminal conduct should prevent Mr Candy from invoking the privilege exemption.

Whilst the court acknowledged that the iniquity principle might validly displace the privilege exception as a means of avoiding the obligation to respond to a DSAR in the right circumstances, Mr Holyoake’s case floundered on its facts. The High Court confirmed that a claim to privilege will not be set aside on the basis of the iniquity principle unless there is at least a prima facie case of wrongdoing. The High Court decided that the facts of the case did not support Mr Holyoake’s allegation that a crime had been committed by way of DPA breaches. It further held that to extend the iniquity principle to cover potential breaches of human rights laws as per Mr Holyoake’s alternative case would be too radical and was not supported by any existing authority.

Motive for making a DSAR

In 2004 the Court of Appeal commented in the Durant [5] case that the purpose of the data subject access rights in the DPA was not to assist a person to obtain documents that may help him or her in litigation or complaints against others. That comment has since been cited as authority for the proposition that a DSAR would be invalid if it was made for the collateral purpose of assisting with litigation, or indeed for any purpose other than solely the verification of personal data.

In Dawson-Damer, however, the Court of Appeal has emphasised that neither the DPA, nor the EU Data Protection Directive (95/46/EC) from which it derives, limit the purpose for which a DSAR may be made. On the contrary, the DSAR regime is ‘purpose-blind’ and the court acknowledged that, in reality, it would be “odd” for there to be no collateral purpose behind the making of a DSAR. As a result, Dawson-Damer would therefore now seem to be reliable authority that (in the absence of abuse of process, at least) the motive behind the making of any DSAR should not matter and should not impact upon the data controller’s obligation to comply.

Firms should note, however, that that is not the end of the story…

Court’s discretion

…In the even more recent Deer case [6], a differently constituted Court of Appeal has considered the additional point that, under section 7 (9) DPA, the court has a discretion whether to compel a data controller to comply with a DSAR. The court’s focus on that discretion in Deer may have the effect of diluting slightly some of the conclusions reached in Dawson-Damer.

The Court of Appeal in Deer noted that the court must have regard to the general principle of proportionality which runs through EU law when exercising its section 7 (9) discretion, with a view to ensuring a fair balance between the right of the individual to have access to his personal data on the one hand, and the interests of the data controller faced with a DSAR on the other. The court decided that some of the (non-exhaustive) factors which can be taken into account include:

whether there is a more appropriate route to obtaining the requested information (such as disclosure in legal proceedings);
the nature and gravity of the breach and/or the level of prejudice suffered by the data subject;
the reason for making the DSAR;
whether the making of the DSAR amounts to an abuse of rights or procedural abuse;
whether the request is really for documents rather than personal data;
the potential benefit to the data subject.

WM Comment

Dawson-Damer is good news for data controllers to the extent that it confirms that proportionality can be taken into account when it comes to considering the time, cost and effort involved in not only copying and supplying information to a data subject, but also in conducting the search for data in the first place.

Less favourable is the authoritative confirmation that, if a data controller is going to refuse to comply with a DSAR, it will have to provide an explanation, and to adduce evidence, to support its claims to the disproportionality and privilege exemptions.

Otherwise, Dawson-Damer is a largely data subject-friendly decision. It confirms an expectation that data controllers will be aware of, and have systems in place to deal with, DSAR obligations, and suggests that, in the majority of cases, data controllers receiving DSARs will have to comply.

The judgment in Deer is cast in terms which largely mirror and support Dawson-Damer, with the court concluding paragraph 110 with the statement that “[i]f there are no material factors other than a [D]SAR in valid form and a breach of the data controller’s obligation to conduct a proportionate search, then the [court’s section 7 (9)] discretion will ordinarily be exercised in favour of the data subject“. However, in practice, Deer is likely to give data controllers some more ‘wiggle room’ when it comes to their decisions of whether, and how, to respond to DSARs.

Essential advice

DSARs are increasingly being used tactically, both prior to and alongside the litigation process. Here are our top tips for managing firms’ important risks and responsibilities:

Education is essential. Apart from understanding the legal implications of a DSAR, staff should be trained to recognise, and respond appropriately to, receipt of a DSAR.
The maximum administration charge that can be levied for dealing with a DSAR is £10. Firms must be aware of this, and may wish to build into their business planning and projections some lee-way for the irrecoverable time and cost that responding to DSARs is likely to involve.
Firms should ascertain all of the various sources within which they hold or control personal data. They should then assess whether the data systems that they already operate are sufficiently quickly and easily searchable, so that responding to DSARs can be as cost-effective as possible.
File management and document classification practices should be reviewed to see whether changes can be made, which may then assist whenever a ‘privilege exemption’ assessment is carried out. This might be particularly relevant for firms with in-house legal teams.
The time limit for complying with a DSAR is 40 calendar days. Firms must be aware of this and ensure that their receipt and response protocols take account of this very tight timescale.
Data controllers do have the option to request further information to clarify DSARs. Where possible, data controllers should make use of this option.
Whenever a data controller wishes to rely on the disproportionality or the privilege exemption, it should be prepared to justify that decision, with evidence in support. To do that, an initial critical review of data held will need to be undertaken and recorded – a blanket assertion of privilege or that it would be too difficult, costly or time-consuming to search through voluminous papers will not suffice.
Firms may also wish to assess DSARs received against the factors set out in Deer when deciding whether and how to respond (albeit noting that, if an institution gets its assessment wrong, it could face intervention from the Information Commissioner’s Office (ICO) and possible sanctions).
In many cases it will be advisable for data controllers to take urgent specialist advice immediately upon receipt of a DSAR. This will be particularly important where there is any ongoing or underlying dispute, which may involve associated legal and tactical risks.

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[1] of receipt of the request or, if later, of receipt of the fee and any further information which the data controller has reasonably requested in order to allow him to identify the person making the request and to locate the information sought
[2] [2017] EWCA Civ 74
[3] set out in paragraph 10, Schedule 7, DPA
[4] [2017] EWHC 52 (QB)
[5] Durant v Financial Services Authority [2004] FSR 573
[6] Deer v University of Oxford and Ittihadieh v 5-11 Cheyne Gardens RTM Co Ltd & Ors [2017] EWCA Civ 121

Beware the middle ground: Bank in breach of intermediate duty to explain

Banking Litigation partner Richard Sandford explains a recent case which might mark the beginnings of […]

Banking Litigation partner Richard Sandford explains a recent case which might mark the beginnings of a trend towards increased accountability for lenders when dealing with customer queries.

Crestsign + Thomas v Tridos = intermediate duty to explain

Historically, authority concerning the applicable duty of care on the sale of financial products has differed according to whether advice was being given to a customer about whether to purchase a product (in which case the duty owed by the lender was greater: to ensure that the advice given was full and accurate); or whether the lender was merely providing information (in which case the duty was lesser: not to misstate facts) [1]. Retail lenders and their advisors will no doubt be familiar with the case of Crestsign Ltd v National Westminster Bank plc [2], however, in which the High Court held that lenders may owe an intermediate (or ‘mezzanine’) duty, to explain fully and accurately the nature and effect of products about which it chooses to offer an explanation. The Crestsign duty represents something of a middle ground – it is less onerous than the duty owed by a lender in an advisory case, but it is more onerous than a mere duty not to misstate.

In the recent case of Thomas v Tridon Bank NV [3] the High Court held that this intermediate duty to explain applied, and it found that the bank in question was in breach.

Case

The claimant customers operated a farming business and had a number of loans from the defendant bank on variable interest rates. In 2008 the customers enquired about fixing the rate on their borrowings. The lender’s representative remarked to one of the customers that he thought the customer was sensible to think of fixing the rate for ten years, because the ten year rate was lower. When the customers later struggled to service their loans, the relationship between the parties broke down. The customers brought proceedings on the basis that the lender had failed to fully explain the financial consequences that would flow from a ten year fix and that the lender had failed to disabuse them of their inaccurate impression of the likely level of repayment penalty (which they had made known to the lender’s representative).

Court decision and key takeaways

The High Court agreed with the customers. Analysing the authorities and finding that the relationship between the customer and the bank was not an advisory one and that no advice was given, the court decided that case law to date did not preclude the imposition of an intermediate duty of care outside the context of an advisory relationship.

As such, when the customer enquired about fixing interest rates in this case, the lender owed a duty to provide a plain English explanation of what fixing the rates would entail. That included explaining:

that the rate could be fixed for a period, whether in months or years and whether for any minimum or maximum time;
where the available rates could be found;
a calculation of the forward cost of the money;
the effective rate that would be repayable;
the financial consequences of early repayment. Whilst a worked example may not have been necessary, the ingredients of the relevant calculation should have been provided; and
the court also considered that the lender should have made clear to the customer that, whilst fixing for a longer period meant achieving a lower rate, it also meant that the longer there was left to run after early repayment, the higher the redemption penalty would be.

The court commented that the existence of a duty of care, and the level of that duty, will depend on the particular facts of the case and whether it is appropriate to impose such a duty in the circumstances.

Highly relevant to the question of whether it is appropriate to impose the intermediate duty are:

Whether or not the lender has issued any effective disclaimer;
Whether the COBS Rules under the Financial Services and Markets Act 2000 and/or the FSA Principles of Business, including the Treating Customers Fairly Rules (TCF) apply; and
Whether or not the lender subscribes to, and assumes responsibility for, the Business Banking Code or any other similar promises.

WM Comment

Whether or not a duty of care applies in a non-advice case is now a very subtle question. Pending any future clarification from the higher courts, it does seem that Crestsign and Thomas v Tridos are signalling an increasingly customer-focused approach. Lenders will be well advised to review their marketing and contractual documentation so as to include effective disclaimers where possible and to ensure that they are not making promises that they are not fully willing and able to keep. Lenders should also ensure that their staff are properly trained as to the possible liabilities, so as to limit the risk of ‘off the cuff’ remarks made in response to customer queries giving rise to claims later down the line.

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[1] see Rubenstein v HSBC Bank plc[2011] EWHC 3204 (QB); Green v Rowley [2012] EWHC 3661 (QB); and Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465
[2] EWHC 3043 (Ch)
[3] [2017] EWHC 314 (QB)

The cost of dealing with a litigant in person

Why a litigant in person was worth £150 per hour… Banking Litigation specialist Rebecca Calland […]

Why a litigant in person was worth £150 per hour… Banking Litigation specialist Rebecca Calland clarifies the court’s approach when calculating the level of costs to be allowed for work done by litigants in person.

The rules and a recent case

Part 46 of the Civil Procedure Rules (CPR) provides for an allowance of costs to be paid to a successful litigant in person. CPR 46.5 allows a litigant in person to be paid costs for the same categories of work and disbursements which would have been allowed if the person had been legally represented. The amount to be allowed to the litigant in person will either be £19 per hour [1] or, where the person can prove financial loss, the amount that he or she can prove to have been lost for time reasonably spent on doing the work.

In the recent case of Spencer and anor v Paul Jones Financial Services Ltd [2], a Master in the Senior Courts Costs Office allowed the rate of £150 per hour for a litigant in person whose claim against the defendant settled for £220,000.

The litigant in person was able to obtain an hourly rate that was significantly higher than the prescribed £19 because he presented his evidence with sufficient specificity to establish that level of financial loss. To achieve this, he adduced company accounts to show that his business (a legal services company) had suffered a significant downturn during the period in which he was working on the case and that, at all other times, he had always worked at full capacity for the business. Acknowledging, by reference to the evidence, that the litigant in person’s usual charge-out rate ranged between £150 and £165, the Master allowed the hourly rate of £150.

As an interesting aside, the Master also allowed the litigant in person to recover fees paid by him to his financial advisor in return for work done which quantified his loss for the purposes of the litigation. This was despite the financial advisor not being a court-appointed expert and not producing a report for use in court, and despite a potential conflict of interest (as the advisor also managed the litigant in person’s investment portfolio).

The Master held that it is the nature and extent of an ‘expert’s’ interest in the case or party that determines whether he or she should be precluded from giving evidence. In this case, the financial advisor had the relevant expertise and, had the matter not settled, the litigant in person would have been proceeding with evidence to which the court could attach less weight than had it been endorsed by an expert’s declaration of duty to the court. On that basis, and because the defendant had not taken issue with the admissibility of the financial advisor’s evidence until the costs claim, the financial advisor’s fees were allowed.

Practical implications

The message from this case is clear. Just because the party on the other side of a case is a litigant in person, doesn’t mean you should underestimate them.

The litigant in person in this instance was a highly skilled individual who advanced a valid claim and achieved a good settlement. Not only were his costs then allowed as the successful party, but they were assessed at a level far in excess of the prescribed £19 per hour because he was able to adduce evidence that those costs were reasonable.

On a practical level, the case provides helpful guidance as to the evidence that a litigant in person should be expected to provide if he or she is to prove financial loss in respect of a costs claim, and as to the approach that the court will take when a claim is made for non-expert specialist assistance.

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[1] as per CPR 46.5 (4) (b) and the relevant Practice Direction
[2] (unreported) 6 January 2017, Senior Courts Costs Office

Property professionals still in the firing line

For a long time following the 2007/8 economic downturn, lenders and lawyers were kept busy […]

For a long time following the 2007/8 economic downturn, lenders and lawyers were kept busy recouping losses caused by surveyors’ overvaluation negligence. Now that the bulk of those claims have been resolved, other property professionals are finding themselves in the firing line, as claimants find new ways to mitigate projects that have not lived up to expectations.

Beware ‘frenemies’

One recent example has made the legal and wider press headlines and is likely to ring alarm bells with all property professionals and their indemnity insurers. In Basia Lejonvarn v Burgess [1], Mrs Lejonvarn had been friends with Mr and Mrs Burgess for many years when they mentioned to her their plans to undertake a high level landscape garden project. Mrs Lejonvarn, an architect and project manager, agreed that her team would carry out the project and that, because of her long-standing friendship with the couple, she would provide her project management services for free. The project went badly, costs overran and the relationship soured. Mr and Mrs Burgess sued Mrs Lejonvarn for some £265,000 (in circumstances where she had no PI cover) and the case reached the Court of Appeal. The court held:

The absence of both any intention to create legal relations and any consideration meant that there was no contract under which Mrs Lejonvarn owed liability to the couple…
…however the absence of a contract did not mean that the parties’ relationship could not be akin to a contractual one.
Professionals expect others to act in reliance on them, often with financial or other economic consequences. In this case Mrs Lejonvarn had assumed certain responsibilities over the project whereby a professional skill was being exercised. It was reasonable in the circumstances for Mr and Mrs Burgess to rely on Mrs Lejonvarn’s exercise of professional skill and they did so. Mrs Lejonvarn did therefore owe a duty of care in tort.
The duty was to exercise reasonable care and skill in providing the professional services [2] (which, the judge noted in the earlier High Court decision, could extend to negligent omissions as well as the performance of negligent acts).

The court did acknowledge that this case did not concern mere ad-hoc, informal advice in a social context. Property professionals therefore perhaps do not need to be concerned that they can no longer offer any advice or services at all to friends without incurring liability, but they do need to be more careful than ever before to properly distinguish between the truly social, or potentially professional, footing of any relationship whenever advice or services are provided in an informal context. It is crucial to note that whether or not any money changes hands may be irrelevant.

The case is also another example of the risks that can arise in any professional services arrangement which is not properly framed in a contractual retainer [3].

If you’re going to do something, do it right

In Basia Lejonvarn v Burgess, Mrs Lejonvarn was never obliged to carry out professional services for her friends, but once she had agreed to do so, she was under a legal duty to provide those services properly. In Crestsign and Thomas v Tridon Bank NV (the lenders cases discussed in Richard Sandford’s article earlier in this issue of Banking Matters [4]), the courts found that, once a bank had chosen to offer some explanation about a product, it owed a duty to explain fully and accurately the nature and effect of that product. The recent case of Orientfield Holdings Ltd v Bird & Bird [5] also exemplifies the principle that, if you’re going to do something, do it right.

The defendant law firm (“the solicitors”) had been engaged to deal with the conveyancing of a high value property in London. It considered that the seller’s responses to the pre-contract enquiries were insufficient, and so it obtained a Plansearch Plus report (“the Report”), which provided details of planning applications in the vicinity of the property. The solicitors skim-read the Report, formed the view that it did not contain anything which adversely affected the property (despite its mention of a large application which, as further straightforward investigations would reveal, was a proposed school development within 250 metres of the property) and failed to summarise the content of the Report in the report on title for the client. The client then exchanged contracts but became aware, a few days before completion, of the proposed major development. The client decided not to proceed with the purchase, and lost a substantial deposit. The client issued proceedings against the solicitors.

The High Court found that, whilst the solicitors had not been duty-bound to obtain the Report, once they had done so, they were under a duty to explain the effect of the Report to the client.
The solicitors were in breach of that duty by failing to include in the report on title a summary of the Report and the further investigations that could be undertaken without undue difficulty, cost or delay; and by failing to invite instructions in the light of that summary. Had the solicitors provided a summary and sought instructions, that would have given the client the opportunity to decide whether to proceed, withdraw or obtain further information before deciding.

Although the solicitors launched an appeal [6] which was unsuccessful overall, it is noteworthy that the principle that, having obtained the Report the solicitors were under a duty to explain it, did not form the basis of any of the grounds of appeal.

WM Comment

In a climate where claimants are looking for ever-more ingenious ways to recoup losses when property purchases and projects go awry, the key implication to come out of recent case law is that, if a professional is going to something – whether or not they get paid for it; whether or not there is a contract in place; and whether they are providing information, advice or services – they must do it right! From the professional’s perspective, the best advice remains to always exercise reasonable care and skill to the appropriate standard and to ensure that your delivery of services is properly delineated in a retainer and fully covered by indemnity insurance.

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[1] [2017] EWCA Civ 254
[2] and the relevant standard, in this case, was that of a reasonably competent architect and project manager
[3] see our earlier article for further practical advice on this subject
[4] see our article Beware the middle ground: Bank in breach of intermediate duty to explain
[5] [2017] EWCA Civ 348
[6] arguing that the judge had erred by finding negligence but failing to make a detailed finding as to what the summary of the Report should have covered; and that a summary of the Report would not have revealed the proposed development and that the client would not, therefore, have declined to complete

In case you missed them…

The last few weeks have seen the resolution of various high profile cases and procedural […]

The last few weeks have seen the resolution of various high profile cases and procedural matters of interest to retail lenders. In case you missed them previously, read on for Walker Morris’ briefings on the AIG Europe case, BPE Solicitors v Hughes-Holland, the finalised Pre-Action Protocol for Debt Claims and the FCA’s rules and guidance on PPI complaints and Plevin.

Automatic capitalisation: Finalised FCA guidance and remediation framework

Andrew Beck and Louise Power summarise the key aspects of the FCA’s finalised guidance on […]

Andrew Beck and Louise Power summarise the key aspects of the FCA’s finalised guidance on the fair treatment of mortgage customers in arrears and the impact of automatic capitalisation, and offer their practical advice.

The issue

Since 2010 it has been contrary to the Mortgages and Home Finance: Conduct of Business Sourcebook (MCOB) rules for firms to automatically capitalise mortgage arrears where the impact on the customer would be material. Following an investigation into the fair treatment of mortgage customers in arrears and the impact of automatic capitalisation, which included a public consultation and input from an industry working group comprised of two trade associations and ten firms from across the retail lending section, the FCA concluded that some firms automatically include customers’ arrears balances within contractual monthly instalments (CMI) calculations, following a calculation trigger (such as an interest rate change); and that that amounts to automatic capitalisation in contravention of the MCOB rules. Although acknowledging that the automatic capitalisation may be inadvertent on the part of some lenders, the FCA has noted that it results in firms automatically collecting the arrears over the remaining term of the mortgage, while also treating them as immediately payable. That can lead to higher CMIs and a number of possible unfair outcomes for customers, including (non-exhaustively): less disposable income and therefore arrears taking longer to repay and/or missing payments on other financial commitments; an adverse effect on credit records; arrears management fees being charged incorrectly or inappropriately; and arrears balances being presented inaccurately on court applications.

The solution

The FCA has therefore now published its finalised guidance for residential mortgage lenders and administrators of regulated mortgage contracts on the fair treatment of mortgage customers in arrears and the impact of automatic capitalisation. The guidance confirms that the FCA expects firms to:

review whether, in respect of regulated mortgages and home purchase plans subject to the relevant FCA rules during the period since 25 June 2010, they have automatically capitalised arrears, and if so to review whether this has caused harm to customers;
provide appropriate remediation;
explain the impact of automatic capitalisation clearly and fairly to affected customers, as well as what steps they have taken to remediate;
make whatever changes are needed to policies, procedures, systems and to terms and conditions to ensure compliance with the FCA’s requirements and the MCOB rules; and
review their provisioning and capital to take account of the impact and consequences of remediation.

The guidance also:

contains a suggested framework and a ‘how to’ guide that firms can use to correct the effects of automatic capitalisation and to pay compensation to customers; and
sets a deadline for completion of remediation of 30 June 2018.

WM Comment

As of August 2016 the FCA estimated that around 75,000 customers will have been affected by automatic capitalisation. That figure is likely to have increased, however, following the base rate change later in that month. While many thousands of customers will be entitled to remediation, the FCA’s analysis has indicated that the likely level of repayment due to each customer will be relatively low, possibly in the low hundreds of pounds.
If firms can be proactive and efficient in implementing their review and remediation process, the costs associated with compensating customers can be kept to a minimum. Walker Morris will be happy to help firms to achieve that aim, by providing a ‘one stop shop’ service, whereby we can help you: to review your recoveries systems and all relevant legal documents; to consider and respond to customer claims (where appropriate); to draft or review your customer communications; and to implement an effective remediation process as quickly and efficiently as possible. If you would like any further advice or assistance in connection with the FCA’s findings and finalised guidance, please do not hesitate to contact Andrew Beck or Louise Power.

Who we are and what we do – Banking Matters – Spring 2017

Candlelighters charity challenges Several members of the Banking Litigation team are rising to the charity […]

Candlelighters charity challenges

Several members of the Banking Litigation team are rising to the charity challenge this year, as they train to take part in the Yorkshire 3 Peaks in aid of Candlelighters, Walker Morris’ charity for 2017, in July. The more the merrier for what promises to be an enjoyable event and a highly worthwhile cause, so please get in touch with Louise Power if you’d like to join in!

Sharing our experience… with the CML!

Andrew Beck was very pleased to speak at the CML Arrears and Possession Conference in April about Walker Morris’ recent successes with an alternative approach for lender clients who find themselves faced with risks to their security when borrowers fall into lease arrears and landlords threaten forfeiture.

Andrew also updated the conference delegates on Walker Morris’ drive, in conjunction with one of our key retail lender clients and the CML, to implement a new Pre-Action Protocol – the draft Pre-Action Protocol for Claims based on Forfeiture of Long Residential Leases – which seeks to address the common problem that the first a lender hears about a leasehold borrower’s financial difficulties is often when the landlord seeks to forfeit the lease, by which time the lender’s options might be limited.

(Andrew will publish a briefing on these interesting and innovative developments shortly, so watch this space!)

Regular client reviews

Partner Andrew Bennett has recently conducted one of his regular rounds of reviews with the Heads of Legal of some of our clients to see what are the key ‘hot topics’ for them. The clear winners were the new General Data Protection Regulation and the Payment Services Directive (PSD2), on both of which Walker Morris’ Regulatory team (lead by Jeanette Burgess) are currently advising extensively. Please contact Andrew or Jeanette if you would like any advice or information.

Client training

Richard Sandford was very happy to be invited to deliver training to a high street lender client recently, on topics ranging from professional negligence and commercial property valuations, to shortfall recovery routes and procedures.

All of Walker Morris’ specialist lawyers are happy to help clients with their individual training requirements. If you would be interested in speaking to us about your business’ training needs, please do not hesitate to get in touch.

Contacts

Richard Sandford, Partner, Banking Litigation

Richard Sandford
Partner
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