Banking & Finance sector involved in highest volume of High Court claims in 2023 (being the highest since 2014). Trend has continued into Q1 2024.

Analysis by international law firm CMS and litigation data analytics company, Solomonic, shows that the Banking and Finance sector saw the highest volume of new High Court claims of any sector filed in 2023 with 1,070 claims, surpassing the previous high (1,006) seen in 2014. Data to the end of Q1 2024 shows the Banking and Finance sector continues to top the charts for new claims.

The CMS Banking Disputes report 2024, released today, looks at key dispute resolution trends in the Banking and Finance sector, focusing on where, and how, banking disputes are being determined in 2024 and what may lie ahead. The report shines a light on activity across the English courts, key arbitration institutions, and alternative dispute resolution services such as the Financial Ombudsman Service (FOS) and British Banking Resolution Service (BBRS).

Other key findings in the report include:

• 2023 demonstrated the “long tail” of market events with claims still being filed following the collapse of Lehman Brothers in 2008.
• In contrast, there is also evidence of a more recent trend of claimant law firms looking to file claims quickly after market events to establish themselves as the lead claimant firm on a matter.
• The FOS has reduced pending complaint volumes and wait times for decisions over the last year.
• During 2024, the FOS is expecting a growing number of complaints regarding fraud, a rise in complaints regarding irresponsible lending, a rise in complaints regarding account closures, and at least the same volume of complaints regarding motor finance.
• Use of the BBRS by SMEs remains subdued and the future of the BBRS remains uncertain.
• Various interest groups are calling for a new banking dispute resolution tribunal to be formed.
• Arbitration is consistently used by the Banking and Finance sector to determine disputes. Data from the LCIA shows that the Banking and Finance sector has accounted for 25% of its total caseload on average over the last six years.

Tom Dane, Partner and Head of Finance Disputes at CMS commented:

“The Banking & Finance sector is usually vying with the Construction and Professional Services sectors for the highest volume of new High Court claims each year. However, 2023 was a particularly strong year for the Banking & Finance sector for claims activity (the highest since 2014) and data for Q1 2024 shows this is continuing. There are a number of different drivers for this with claims from historic market events still flowing through the system, challenging economic conditions leading to defaults and disputes, high levels of fraud giving rise to direct and indirect claims, and more recent headlines around debanking seeing an increase in claims regarding the termination of banking relationships.”

“Outside of the High Court, the Financial Ombudsman Service continues to be busy. Going back 2-3 years the FOS was under pressure with a backlog of complaints and long wait times. However, the FOS has successfully reduced pending complaint volumes and wait times for decisions over the last year.

“Due to the lack of uptake for the British Banking Resolution Service by larger SMEs (falling out of scope for FOS), it seems unlikely that the BBRS will continue for much longer. If the BBRS is disbanded, there will be renewed calls for a new banking dispute resolution tribunal to be formed to enable SME/bank disputes to be determined outside of expensive court proceedings.”

The CMS report also comments on the following hot topics for 2024:

• Debanking
• Class actions
• Motor finance commission claims
• ESG litigation
• The future of the Quincecare duty
• Redress schemes

As to some of these topics, Tom Dane commented:

Debanking: “The Nigel Farage debanking complaint in 2023 received widespread coverage and has encouraged claims arising from bank account closures. However, a 2024 High Court judgment has put a marker down regarding some of the challenges faced by such claims.”

Class actions – “Class action risk is on the rise generally in the UK and banks continue to feature in pending claims across all available UK class action regimes. This trend is very likely to continue throughout 2024 and beyond.”

ESG litigation – “We remain at the early stages of ESG litigation action against banks and other financial institutions in the UK. As we move through 2024 and into 2025 it is likely we will see some form of regulatory action taken by the FCA under the soon to be introduced anti-greenwashing rule and litigation either via activists or claimants seeking commercial returns.”

The CMS Banking Disputes Report 2024 can be found here.