Banks avoid facing class action suits as Financial Services Bill passes into law

BANKS have walked away from potentially paying out billions of pounds in class action settlements, after a clause in the Financial Services Bill surrounding the matter was struck before the bill passed though parliament.

The Financial Services Bill, which reached Royal Assent during the wash-up period last week, saw clauses 18 to 25 struck out by financial services secretary Lord Paul Myner before being passed into law.

If the clauses had been included, it would have meant that class action suits, which often equate to more than £20m a claim, could be taken against financial institutions.

The move has been seen by some groups as a blow to shareholder rights and corporate governance.

“A number of European investors including those in the UK – currently have no right to redress and no efficient way to bring a joint lawsuit despite having suffered fraudulent or irresponsible corporate behaviour,” said Stephen Everard, managing director at Goal Group.

Lawmakers, however, have said the issue of consumer redress is likely to come up before parliament again, as bodies such as the Civil Justice Council will continue to lobby on the matter.

Last year, the average amount of class action settlements rose to $37m (£23.9m), according to Cornerstone Research.