Mis-Selling – Consumer Redress Schemes Under The Financial Services & Markets Act – Past Business Reviews

The Financial Conduct Authority (FCA) may rely on Section 404 of the Financial Services and Markets Act 2000 (FSMA) to implement past business reviews in a number of possible areas. Two such areas which the FCA appear to be interested in are:

  • Defined benefit (DB) pensions; and
  • Equity release schemes.

DB pensions transfer market

In June of this year, the FCA set out their steps to improve DB pension transfer market. Within the published guidance, Interim Chief Executive, Christopher Woolard, commented:

“The proportion of customers who have been advised to transfer out of their DB pension is unacceptably high. While much of the advice we looked at was suitable, we are still finding too many cases in which transfers were not in the customer’s best interests.”

Equity release schemes

During the same month, the FCA also released their key findings of their exploratory work on the advice given in the area of later life lending and found “3 areas of concern about the suitability of advice provided, which they consider increases the risk of harm to consumers in this market:

  • Insufficient personalisation of advice
  • Insufficient challenging of customer assumptions
  • Lack of evidence to support the suitability of advice.”

Past business reviews and consumer redress schemes

The FCA may require a firm to establish and operate a consumer redress scheme if:

S404 (1) a) It appears there may have been widespread or regular failure by relevant firms to comply with requirements applicable to the carrying on by them of any activity;

(b) it appears to it that, as a result, consumers have suffered (or may suffer) loss or damage in respect of which, if they brought legal proceedings, a remedy or relief would be available in the proceedings; and

(c) it considers that it is desirable to make rules for the purpose of securing that redress is made to the consumers in respect of the failure (having regard to other ways in which consumers may obtain redress).

The redress scheme is overseen by the FCA who appoint a skilled person to review what action the firm is taking.

The firm must ask the consumers whether they wish to have the advice given to them reviewed. The consumer has the choice to opt in or out of the review. The redress scheme doesn’t necessarily determine that redress is due to that particular consumer. While the consumer has the choice to opt in, they can also seek legal advice on their rights in relation to any redress. It is not necessary for the consumer to take part in the redress scheme and the notification from the firm to the consumer of the redress scheme, may prompt litigation.

The Courts have decided that the firm, when it embarks on a past business review, owes no duty of care to its customers to carry out the review with reasonable skill and care (CGL Group Ltd v Royal Bank of Scotland Plc [2017] EWCA Civ 1073).

The fact that a review is under way doesn’t necessarily stop the limitation clock from running, as the fact that you have opted into a review doesn’t mean the firm is going to decide you are entitled to compensation.


Therefore, if you receive a letter from a financial organisation advising you that they are conducting a past business review which includes advice previously given to you, you should consider:

  1. Obtaining independent legal advice
  2. Contemplate bringing legal proceedings
  3. Negotiate a standstill agreement

financial past business reviewsHow can Nelsons help

Lynsey Burke is a Senior Associate in our Dispute Resolution team, specialising in professional negligence claims.

If you think you have received a review letter or think you may have been given poor financial advice on equity release or DB pensions, please contact Lynsey or another member of the team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online enquiry form.