Disagreements between banks and business customers happen all the time, whether it is over something minor like contested charges or something more serious like the enforceability of a personal guarantee or even bank fraud.
The approach you take to resolving such matters will depend on a variety of factors, including the complexity of the issues raised and any adverse consequences that may arise if the dispute is not resolved in your favour.
Dispute resolution options
Currently, there are five principal ways in which a banking dispute can be resolved:
• through direct discussions between you and your account manager;
• through the utilisation of your bank’s internal complaints procedure;
• through a referral made to the Financial Ombudsman Service;
• through lawyer supported negotiation or mediation; or
• through the instigation of court proceedings.
In the future, you may also be able to use the Business Banking Resolution Service once it is fully up and running – click here for further details: in which options should be pursued
Usually it would seem logical to start with option one and then work your way through the list in numerical order.
However, there are cases where this will not be appropriate and jumping straight to option five and seeking court assistance would be the best route.
This includes where an injunction is required to prevent your bank from taking action which could have serious or irreversibly damaging consequences for your business, such as revoking your credit facilities or appointing an administrator.
There may also be cases where a referral to the Financial Ombudsman Service is not permissible because your business does not satisfy the eligibility criteria.
These require you to be one of the following things:
• a micro-enterprise with an annual turnover or balance sheet not exceeding €2 million and which employs fewer than ten staff;
• an SME with an annual turnover of less than £6.5 million or an annual balance sheet below £5 million and which employs no more than 50 people;
• a charity with an annual income of less than £6.5 million; or
• a trust with a net asset value of less than £5 million.
Also, you may not be eligible if you have not used your bank’s complaints procedure first or have waited more than six months following the conclusion of that process before referring the matter to the Financial Ombudsman.
Role of your solicitor
When you seek advice from a solicitor, our role will be to:
• help you understand what has happened;
• ensure you have access to relevant documents and information;
• review the events leading up to the dispute to determine where liability lies;
• explain your rights of redress where responsibility rests with the bank;
• explain your obligations and culpability where responsibility rests with you;
• help you to contain the fallout where there is a risk of ongoing harm; and
• support you in resolving the dispute cost-effectively.
When to seek legal advice
We recommend talking to a solicitor as soon as it becomes clear that your dispute is unlikely to be resolved through a simple administrative process or where the stakes are high if the dispute is not resolved in your favour.
Specifically, we advise that legal advice is sought where your dispute concerns:
• an alleged breach of mandate by your bank which has resulted in them failing to make an authorised payment or, alternatively, in processing a payment that you did not sanction;
• your alleged breach of the terms of a secured loan which raises the possibility of an administrator being appointed or you being pursued via a personal guarantee;
• an alleged misrepresentation by banking staff which induced you to buy an unsuitable financial product or make an inappropriate investment; or
• an alleged financial fraud perpetrated by bank personnel or an unconnected third party and in which you have been caught up as an innocent victim.
Lawyer supported negotiation or mediation
Many of the clients who come to us do so because they feel their bank is not taking them seriously or because positions in the dispute have become entrenched.
In this scenario, our advice is to contact the bank and ask them if they are prepared to enter negotiations or to agree to a mediation in which an impartial person is asked to work with you to explore possible settlement terms.
In our experience banks are keen to engage in this process because they want to keep disputes out of the court arena when they can, and because they know how effective negotiation and mediation can be even in apparently intractable matters.
For further information on the resolution of commercial banking disputes, please contact us on 0300 303 2071.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.