UK: Financial Services Bill: Royal Assent Following Removal of Collective Actions Provisions

Introduction

The Financial Services Bill, having reached its third reading in the House of Lords, has received royal assent before the dissolution of Parliament prior to the general election. This has primarily been achieved by the removal of its proposed, and ultimately controversial, provisions in relation to collective actions.

Background

The Financial Services Bill had contained provisions to provide a specific right to financial consumers to bring collective actions against authorised firms in order to seek redress for losses suffered. Had these provisions remained in the Bill and been passed, they would potentially have had a major impact on the financial sector, both providing financial consumers with another means by which to seek redress and also seeing financial firms face the potential risks and costs of such actions.

Both the industry and other bodies raised serious concerns about the provisions, in particular in relation to the scope of the right, which, as drafted, was not confined to financial consumer claimants; the fact that the right was not explicitly set out as an option of last resort; the fact that so much of its operation was left to secondary legislation; and because the provisions provided for the Courts to allow group actions to be brought on an "opt out" basis, which would have been far more aligned to US style class actions.

Lord Myners was reported last Thursday explaining that the provisions were removed to allow the Bill to receive royal assent before Parliament was dissolved.

Issues

  • The industry and other bodies will be pleased that their concerns appear to have prompted the removal of the provisions and it will also mean, for the moment at least, that financial firms are not facing the prospect of such actions and the potential risks and costs that they can bring;
  • The removal of the provisions mean that, for the moment, financial consumers will not have a specific right to bring group actions against authorised firms. Consumer bodies have already been reported as voicing their concern in relation to consumer protection and urging the next government to review the right to collective redress as soon as possible in the next Parliament;
  • Financial consumers, will, however still be able to pursue group actions under the existing general group litigation court procedures provided certain criteria are met – procedures which are available to any claimant group, not just within the financial sector. They can continue to seek redress via the existing alternative channels available in the financial sector, namely through the Financial Ombudsman Service, the Financial Services Compensation Scheme, and via FSA action to require firms to redress its customers;
  • The existing group litigation procedures have been used infrequently in the financial sector, not least because of the existence of these available alternatives. Therefore, there is a question as to whether the collective actions provisions were, and are still, actually needed;
  • It remains to be seen whether any revised or new collective actions provisions are proposed by the next government. Despite removing the collective redress provisions from the Bill, Lord Myners was reported last week as having said that such measures "were necessary, sensible, and desirable". In debate the Lords made clear that they did not regard this "as the end of the story" for collective proceedings and believe that such a right should be progressed on a holistic basis (i.e. for all consumers, not simply those in the financial sector) but, alongside this, a proper entrenchment of the principle that the Courts are the option of last, not first, resort. The Conservatives have tough regulatory action and consumer protection as high on their agenda as that of the present government; this includes their proposal for a Consumer Protection Agency which would certainly appear to strengthen the rights of consumers to seek redress.

Consumer redress schemes

  • Importantly, the provisions in the Bill providing the FSA with the power to order redress across the industry have remained and have been passed in the form drafted. Previously, such redress could only be required by an order obtained by the Treasury;
  • The industry and other bodies also had concerns about these provisions, not least because it would mean the FSA had the power to order redress without having investigated individual firms and would potentially mean that even compliant firms would still have to review their practices and incur the costs of doing so in order to demonstrate their compliance. In terms of the detail of the provisions, criticism was levelled at their paucity and the lack of clarity as to how and when such orders would be made, the basis on which the FSA might decide that such a scheme was necessary and appropriate, and the nature and scope of such schemes;
  • Arguably, this power will be of more concern to the financial industry going forward, given the likelihood that the FSA will use it to drive forward its aim of dealing with, reducing, and potentially eradicating large-scale mis-selling and the causes of it;
  • The FSA will need to do so, and demonstrate they are doing so reasonably, proportionately, and on a proper and sound basis in order to allay the industry's concerns about the nature and scope of such schemes and their concerns that they are used only where there is a sound and proper basis for doing so.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 12/04/2010.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions