Should firms be worried about Nigel Farage’s hope for a ‘debanking’ class action?
The Nigel Farage Natwest “debanking” saga took another turn last week when the former Ukip leader announced he would seek damages from the high street lender and try to turn his claim into a class action.
The scandal erupted in June when the Brexiteer claimed that Coutts, which is owned by Natwest, closed his account for political reasons.
An independent review found the decision was lawful but noted “serious failings” in Natwest’s treatment of Farage.
Complaints about bank account closures have surged this year, according to the latest figures from the Financial Ombudsman, as the Financial Conduct Authority investigates whether customers are being systematically “debanked” for their political views.
London-based Grosvenor Law is reportedly set to begin the legal fight this week on Farage’s behalf. City PM approached the firm for comment.
Natwest sought to draw a line under the row by scrapping some £7.6m in potential payouts to former boss Dame Alison Rose, who resigned in July after admitting to discussing Farage’s account with a BBC journalist. The bank said on Friday that there was “no finding of misconduct” against Rose.
Graham Huntley, a partner at Signature Litigation, told City PM that the key to bringing a class action would be establishing that a customer has a right to operate a bank account.
“Assuming there is a right to a bank account, then it is going to be hard to bring the disparate variety of circumstances in which customers have lost their banking arrangements into the sufficient common ground that is needed to get a group or representative action off the ground,” he said.
“It is more likely that there would be test cases which could help to deal with the antecedent question of whether the customer has a right to a bank account and if so to what extent.”
Huntley added that the wider issue of “debanking” may be better handled through an industry approach, supported by legislation if needed, to create a code of conduct for banks to adhere to.
“Given the surge in debanking complaints, there may be a critical mass of debanked customers who have complaints against each of the leading banks,” said Sam Claydon, a partner at litigation boutique Candey.
“It would be open to them to seek collective redress through the courts, and in light of the importance of a bank account in modern society, they may have claims that their rights have been breached as a result.”
Harvey Knight, a partner at Withers, noted that a class action “may be possible depending on the number of potential claimants he has identified and the extent to which there is similarity across the cases. However, what it shows is that this issue is going to be a growing problem for banks.”
“Banks should be concerned about having to pay compensation where they have taken a ‘tick box’ approach to debanking customers without making any inquiry into personal circumstances,” added Robert Newcombe, a barrister at Church Court Chambers.
City PM approached Farage’s spokespeople for comment, while Natwest declined to comment.