Out-Law / Your Daily Need-To-Know

Out-Law News 2 min. read

Call for new guide to establishing redress schemes

A group of UK law makers has called on the government to develop compulsory guidelines for organisations seeking to establish a new redress scheme.

The recommendation was contained in a recent report published by the All-Party Parliamentary Group (APPG) for Fair Business Banking, which examined how redress schemes have operated in the UK financial services sector as well as in response to other issues.

The APPG report (63-page / 2.7MB PDF) highlighted how redress schemes set up in the UK have been administered in different ways by different organisations. It described the approach as “fragmented” and said it is difficult for both businesses and consumers to navigate the various different mechanisms. It said the approach also “often fails to produce fair and reasonable compensation” and further cited “flawed” processes that often lack “meaningful victim involvement”. This, it said, has bred a lack of trust in outcomes.

Among its other findings, the APPG said mistakes made in the design of some redress schemes had been repeated in the design of subsequent new schemes, and that research it had commissioned had also identified “bureaucratic insensitivities” and inherent and perceived conflicts of interests at play, as well as cases where significant burden of proof and financial risk had been placed on victims seeking redress. Other schemes were criticised for a lack of transparency of processes, information and outcomes, and a corresponding lack of accountability.

The APPG said clear and compulsory guidelines for setting up a redress scheme are needed and called on the government to “urgently publish a handbook establishing compulsory guidelines by which any public agency …, or any private firm or organisation …, must abide when setting up a redress scheme”.

The guidelines, it said, should reflect nine core “building blocks of a compensation framework”. Those ‘building blocks’ include collaboration between the perpetrator and the victims on the design and administration of the scheme; an entirely independent adjudicator of the scheme; transparency of processes and outcomes; broad eligibility; and fairness and efficiency.

Colin Read of Pinsent Masons, who is a specialist in the design and operation of redress schemes, said: “Although these guidelines will provide consistency and clarity, they should not be overly prescriptive and should allow sufficiently flexibility and discretion to allow the scheme to be a run in such a way that it works for organisations, businesses and recipients of redress.”

The APPG also recommended that an arms-length body be made responsible for setting up and overseeing redress schemes.

It said: “We must create an arms-length body, that could be activated when a scandal emerges, and co-funded by private sector firms responsible for wrongdoing. This body will be composed of expert panels, to ensure guaranteed independence of judgement. It will be accountable directly to parliament and regulators for the expenditure of public funds and the fulfilment of its terms of reference, which must include maintaining trust and integrity in the system. This body would deliver all of the building blocks which this report shows are fundamental to a fair and reasonable redress scheme.”

In relation to scandals arising specifically in UK financial services, the APPG further recommended that a Financial Services Tribunal (FST) be created to adjudicate disputes.

“By offering a forum for accessible and expert dispute resolution, many scandals could be avoided in the first place,” the APPG said. “Indeed, as individuals and businesses seek to resolve disputes, unfair business practices also come to light, which could provide an impetus for financial service providers to improve their service standards.”

It said that repeated and systemic cases in UK financial services should automatically trigger the application of the redress process it has recommended.

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.