When financial mis-selling occurs, victims can suffer monetary losses, significant levels of stress, and uncertainty about their future. When multiple people are affected by the same mis-sold product – for example, a pension, insurance policy, investment scheme, or mortgage – group litigation can be a powerful way to seek justice and compensation. In this handy guide, we explore how group litigation can help victims of financial mis-selling, the types of claims commonly pursued, and what individuals need to do to join a group action.
What is financial mis-selling?
Financial mis-selling occurs when a financial product is sold to a consumer in a misleading or deceptive manner, or when a product unsuitable for the individual’s circumstances is recommended.
Financial mis-selling occurs when:
- A financial advisor or institution fails to provide the full details of the product, including the risks or costs associated with it.
- The product recommended does not align with the customer’s financial situation, goals, or risk tolerance, potentially leading to monetary harm.
- High-pressure sales tactics are used to persuade consumers to buy a product they do not fully understand or need.
The impact of financial mis-selling
Financial mis-selling frequently leaves people with unexpected losses, inadequate financial coverage, or significant economic hardship. Many victims find themselves trapped in unsuitable investment schemes, high-risk pension plans, or unmanageable mortgage products that were not adequately explained.
But the impact isn’t just financial – it can also cause people to experience emotional distress, anxiety, and uncertainty about their financial future. Victims placed their trust in financial institutions or advisors, expecting professional guidance tailored to their needs. When that trust is broken, it often leads to a profound sense of betrayal and frustration.
How group litigation works for financial mis-selling
Many financial mis-selling claims are run on an individual basis. In these cases, victims or their lawyers, might try to claim compensation from one of the following bodies:
- Financial Ombudsman Service: This service helps individuals when a financial business makes a mistake or treats them unfairly, leading to financial loss. The FOS aims to resolve disputes and ensure compensation is provided when appropriate.
- The Financial Services Compensation Scheme: If the financial firm has gone out of business, the FSCS steps in to compensate consumers who were misled or sold unsuitable products.
In financial mis-selling cases, it’s common for many people to be affected in the same way by the same product or service. Group litigation is effective in these situations because it allows multiple victims with similar claims to join together, consolidating their cases into a single, stronger legal action instead of pursuing separate claims individually.
The widespread impact of financial mis-selling is often due to several factors, including:
Standardised sales practices
Financial firms often employ standardised procedures when selling their products, meaning they provide the same information, use the same sales scripts, and implement identical practices with a large number of clients. This approach can lead to widespread mis-selling if these standard practices are misleading or fail to meet regulatory standards.
Systemic misconduct
Financial mis-selling is often a result of systemic issues within financial institutions. When a company prioritises sales targets or profit margins over customer needs, it may instruct advisors to push unsuitable products. If a financial firm markets a product aggressively and widely, the scale of the mis-selling increases.
Uniform product misrepresentation
In many cases, the same product is marketed to thousands of customers using uniform messaging that misrepresents the product’s benefits and risks – even across institutions. So, when the product underperforms or fails, people experience similar losses, creating the foundation for a collective legal action.
The group litigation process
Group litigation for financial mis-selling typically begins when several individuals discover they have been similarly affected by a mis-sold product. These individuals then band together to form a group claim. Here’s how the process usually works:
- Identifying the issue: The first step involves identifying the mis-sold financial product and gathering evidence showing how the institution misled or provided inadequate information to consumers. This step is usually done by a law firm, investigative journalists, or others who suspect misconduct.
- Raising awareness: Once a group action is established, it’s crucial to inform potential claimants about the case. Join the Claim provides a list of active group actions.
- Forming the group: Once the issue is identified, individuals affected by the same product join to form a group.
- Filing the claim: The group, often represented by a law firm specialising in collective litigation, files a legal claim against the responsible financial institution. This claim details the financial mis-selling, the impact on the group members, and the compensation being sought.
- Negotiation, settlement or court action: Many financial institutions choose to settle group claims out of court to avoid the publicity and financial risk of a trial. If a settlement is reached, compensation is distributed among the group members. If no agreement is reached, the case proceeds to court.
In addition to using the formal litigation process outlined above, expert financial mis-selling lawyers may seek to secure compensation via established redress schemes such as the FOS, FSCS, and the Pensions Ombudsman.
Benefits of group litigation
There are several advantages to using group litigation for financial mis-selling cases, including:
Shared legal costs
Legal costs can be expensive. By joining together, claimants share legal costs, making it more affordable for each individual to pursue justice. This is particularly important for those who may not have the resources to fund a legal claim independently.
No-win, no-fee
Many financial mis-selling group actions are run on a no-win, no-fee basis, meaning:
- If you lose your claim, you pay nothing
- If you win, a set fee is taken from your compensation payout
No-win, no-fee group actions help individuals take on big players without the risk of crippling legal bills.
Greater bargaining power
Large corporations are often more likely to respond to the pressure of a group action than to individual claims, so a collective group can have more leverage, increasing the likelihood of a fair settlement.
Holding institutions accountable
Group litigation lets victims hold financial institutions responsible for their misconduct. By uniting their voices, claimants can highlight the systemic nature of the mis-selling, push for meaningful compensation, and, in some cases, force policy changes to prevent future misconduct.
Common types of financial mis-selling claims
Unfortunately, numerous types of financial products are being sold under misleading or incomplete information. Here are some of the most common examples:
Pension mis-selling
Pension mis-selling is one of the most widespread forms of financial mis-selling. This often occurs when individuals are advised to transfer their defined benefit pensions into riskier schemes or investments unsuitable for their needs.
For example, thousands of individuals in the UK were mis-sold Self-Invested Personal Pensions (SIPPs) after advisors encouraged clients to move their stable workplace pensions into SIPPs, promising high returns but failing to disclose the risks. Many people have now joined group actions to recover their lost pension funds.
Mortgage mis-selling
Mortgage mis-selling can happen when people are sold mortgages unsuitable for their financial situation. This can include being advised to take out an interest-only mortgage without being told how they will repay the capital, or being misled about the terms of their mortgage, resulting in higher fees or costs down the line.
For example, mis-selling has affected an estimated 200,000 Irish residents. This scandal happened during the Celtic Tiger era, when banks were aggressively pushing home loans to increase their market share. At Join the Claim, we’re partnering with leading experts in Irish mortgage mis-selling to help you seek justice, and you can find out more about this claim here.
Mis-sold investment schemes
Investment mis-selling often occurs when people are persuaded to invest in high-risk schemes or products unsuitable for their risk profile. Investments – including crypto products – might be marketed with exaggerated returns or without proper information about potential losses.
For example, St. James’s Place has been in the news following allegations of poor financial advice and unfair fee structures. In response, lawyers are helping affected SJP investors claim no-win, no-fee compensation.
Mis-sold insurance policies
Insurance mis-selling has gotten a lot of attention in the UK, particularly involving products like Payment Protection Insurance (PPI) or other types of insurance policies that are not suitable or necessary for the consumer. In these cases, individuals may have been sold policies they couldn’t claim on or were unaware they had.
Steps to join a group litigation for financial mis-selling
If you believe you have been affected by financial mis-selling, joining a group litigation action can be a powerful way to seek compensation. Here’s a simple overview of the steps involved:
1. Find a group claim
The first step is to find an existing group claim that matches your situation. Platforms like Join the Claim make this process straightforward by listing active group claims for financial mis-selling. You can explore cases related to pensions, mortgages, investments, or other financial products and check if they apply to your circumstances.
2. Determine your eligibility
Once you identify a relevant group claim, you’ll need to determine your eligibility to join. This often involves completing an eligibility check, where you provide basic information about the product you were sold and the financial impact you’ve experienced. At Join the Claim, this process is simplified, with a quick online checker.
3. Joining the claim
Once you’ve confirmed your eligibility with Join the Claim, you’ll be asked to register your interest in a group action and we’ll connect you directly with a law firm running the claim. It’s that simple, and you can do it all online.
4. Gathering documentation
To strengthen your claim, you’ll need to gather any relevant documentation. This can include sales brochures, written advice from your advisor, transaction records, and communication from the financial institution involved. Once you sign up with a law firm, they will help you understand what documents are needed and assist you in building your case.
Take a step toward financial justice
Financial mis-selling can cause significant economic and emotional stress for victims, but group litigation provides a powerful way to seek justice and recover losses. By pooling resources and uniting with others who have faced similar issues, claimants can hold financial institutions accountable for their misconduct.
If you think you’ve been affected by financial mis-selling, joining a group action could help you recover what you’ve lost.
Visit Join the Claim today to see if you qualify for an ongoing group claim.
Also, don’t forget to sign up for updates to stay in the loop and learn more about new group claims as they emerge.
