TTF BELIEVES THE FCA IS MORALLY BANKRUPT AND NEEDS TO BE DEFEATED

On 21 March 2022, the APPG on Fair Business Banking filed judicial review proceedings in the High Court (Administrative Division) challenging the FCA’s decision not to act on John Swift KC’s findings that the IRHP Redress Scheme adopted flawed eligibility criteria, excluding a third of customers who were deemed to be ‘sophisticated’. 

On 29 June 2023, the High Court granted the APPG permission to bring its judicial review, meaning that the case will now proceed to a full hearing. A copy of the judgement is available here.

Recap on the story so far

In response to the IRHP mis-selling scandal, the FSA (the FCA’s predecessor) announced a redress scheme in 2012, which paid out over £2bn in compensation.  However, around one third of complaints relating to over 10,000 sales of IRHPs were excluded by the FSA based on an inflexible and arbitrary “sophistication” test. The FCA commissioned an independent review of the IRHP redress scheme, led by John Swift KC.  The review concluded that the exclusion of those customers was wrong because the decision was “without proper justification, consultation, analysis, or safeguards”. 

The FCA published its response to the review’s findings on the same day it made the review public. The FCA decided that it would not take any further action because it did not consider it was wrong and believed “it would not be appropriate or proportionate to take further action.”

The APPG considers that the FCA’s decision is flawed and unlawful. It asked the FCA to reconsider its decision.  It has since filed a judicial review claim on the grounds that: (1) the FCA’s decision is irrational and therefore unlawful; and (2) the FCA failed to consult with the excluded customers who were affected before making its decision.

What has the APPG achieved so far?

Successful judicial review claims against regulators are not common, but after a full-day hearing on 29 June 2023, the APPG overcame the first hurdle when it was granted permission to proceed. The High Court found that both grounds should be determined at a full hearing.  The judgement (reported at [2023] EWHC 1616 (Admin)) is here.   

The Court noted that the case has wider implications about how a regulator must act that are of public importance, including:  

• the extent to which the FCA needs “clear and cogent” reasons to reject an independent review’s conclusions;
• whether it was fair for the FCA to make its decision without consulting with those that it knew would be affected by it; and 
• whether the FCA can “contract out” of its ability to take regulatory action by reaching an agreement with the banks.

What happens next?

The FCA served its Detailed Grounds of Defence and its supporting evidence – including witness statements – on 13 October 2023. A copy of the Defence is here.

The APPG is now preparing our Reply, which is due to be served this week. It is also corresponding with the FCA regarding disclosure of relevant documents. These steps in the proceedings are resource-intensive.

As reported by The Times on 27 November 2023, the Defence confirms that the FCA attempted and succeeded in having Mr. Swift KC water down his conclusions. This and other issues raised by the Defence will be developed in our Reply. 

In light of all this TTF believes this is a profoundly important case; a very real opportunity to show that FCA has behaved wrongly (as stated by John Swift KC) and also unlawfully. We want to support this case as best as we can, seeing it as of massive strategic importance, not just to the IRHP victims but also to the wider cause of showing the FCA to be not fit for purpose – its decision to not do what it should have done to protect the interest of victims of grotesque bank mis-selling leads us with no choice other than to believe that  

THE FCA IS MORALLY BANKRUPT AND NEEDS TO BE DEFEATED