Ombudsman win could let banks off hook, says lawyer
Businesses and individuals who take action against their bank through the Financial Ombudsman Service could be jeopardising their chances of recovering more money back through the courts, one lawyer has warned.
It comes after a Belfast High Court judgment - in which an investor sued First Trust Financial Services Ltd following financial advice provided by the company - showed that cases passing through the Ombudsman have a £150,000 cap on compensation.
The court ruled that in a case of negligence by a bank or financial institution, if you make a successful claim to the Ombudsman and are awarded the maximum, you cannot make a claim on the same basis to a court to recover further losses.
The Ombudsman had ruled in favour of the businessman, who had received the maximum of £150,000. The customer was then attempting to sue the bank for £440,000 in the courts. Maura McKay, senior partner at Shean Dickson Merrick - a Belfast law firm which focuses on banking law and represents borrowers who are in dispute with banks - said the case was significant for a number of reasons.
"This judgment means that for anyone seeking more than £150,000 compensation from a bank or financial institution, bringing a claim first to the Financial Ombudsman may not be a sensible course of action," she told the Belfast Telegraph. "The court ruled that in a case of negligence by a bank or financial institution, if you make a successful claim to the Ombudsman and are awarded the maximum award of £150,000 you will be unable to make a claim on the same basis to a court to recover any further losses suffered."
The businessman was only permitted to continue his claim in relation to fresh allegations against the bank.
Ms McKay has warned that the judgment could result in confusion for anyone seeking to sue a financial institution over negligence.
"While £150,000 may sound like a large amount of money, in many cases both individuals and businesses have been awarded substantially higher levels of compensation by the courts," she said.
She added: "Only by properly assessing the level of damages you may be due can you ensure that taking action through the Ombudsman Service doesn't let the bank off the hook."