If you are involved in a lawsuit involving the bank, you probably heard about the role of forensic accounting. Forensic accountants are hired to help attorneys prove a case. They will examine bank account statements and deposition testimony to provide evidence.
A new study has revealed some facts about banking litigation support. The study examined the dispute resolution policies of 50 large retail banks in the U.S., representing about two-thirds of the nation’s deposits. It found that nearly three-quarters of these banks require their customers to settle disputes before they can file a lawsuit. These agreements are primarily binding and restrict the number of appeals consumers have. Most banks also prohibit class-action cases, which allow groups of consumers to group their claims.
There is an increasing trend among plaintiffs’ lawyers to file class-action lawsuits against banks and other financial institutions. This trend is driven by the large settlements that result from this type of litigation. For example, in one such case, a bank agreed to pay the attorney fees of a putative class of plaintiffs.
While class-action lawsuits may seem daunting, they can benefit a class of victims. Such cases are filed on behalf of many individuals, and the plaintiff represents the whole class. In addition to being easier to justify, class-action lawsuits can result in significant damages.
In banking litigation, class-action lawsuits usually center around various legal issues that affect financial institutions. These issues range from unauthorized account openings to unlawful fees and discrimination claims. Common problems include the Telephone Consumer Protection Act, labor laws, cybersecurity, antitrust regulations, and securities.
A practical insolvency framework can promote financial inclusion, increase credit access, reduce borrowing costs, and preserve jobs and capital. Insolvent businesses, however, cost the global economy billions of dollars in business value, employment, and money each year. Moreover, weak debt recovery and exit mechanisms also lead to a higher cost of capital and a negative perception of risk among investors.
Depending on the situation and the kind of debtor, insolvency has a variety of meanings. For example, a company can be insolvent if it cannot repay its creditors. It often leads to a bankruptcy filing. The legal definition of insolvency is highly complex and situational. The recent case of Fortis, which involved a sale of 75 percent of the company to BNP Paribas, highlights the nuances of insolvency definitions.
Scale of litigation
As a result of the heightened interest in banking regulation, financial institutions are now facing a growing scale of litigation and regulatory costs. According to a recent survey, nearly eight in ten financial institutions have faced a dispute with a regulatory body in the last three years. In the U.K., this regulatory activity has prompted a sharp rise in civil claims against major financial institutions. The Financial Conduct Authority, the independent regulatory body that oversees banking, has also increased its fines.
As a result, this work is expected to continue. Banks embrace litigation despite rising costs because of the high regard the U.K. court system has for financial institutions. Interestingly, eighty percent of respondents agree that the courts get it right – despite the cost of litigation. However, the scale of banking litigation means that the courts must be prepared to take cases worth tens of millions of pounds.
Courts that hear them
The courts that hear banking litigation typically consider several factors. First, they must decide what laws apply in a case. These can include federal, state, and foreign law. Additionally, they must decide which of the 50 states’ laws apply to a particular dispute. Different U.S. jurisdictions use various tests to determine which rule applies. Some courts look for a significant relationship’ between the lawsuit and the relevant statute or law, while others rely on strict formulas.
While banks have long faced litigation involving complex financial products, lawsuits involving mortgage-backed securities are declining. In recent years, these cases have been settled. But as banks continue to develop complex products, litigation is increasing. These lawsuits often involve allegations of fraud, misrepresentation, breach of contract, or fiduciary duty.
Key issues to consider
When dealing with banking litigation, a vital issue is the level of risk. Financial institutions face various threats, from internal operational problems to regulatory compliance. These can be managed by strengthening internal controls, ensuring functional separation, and monitoring ongoing litigation. Litigation risk analysis should be carried out to identify new risks.
Financial institutions are likely to face customer litigation and disruption in the future. These cases can occur in various forms, depending on the complexity of the lending arrangements and the security provided. Typically, a company will give Legal Charges or a debenture of its assets. Moreover, it may have debt postponement agreements and priority arrangements. Finally, a bank will typically seek to obtain cross-guarantees.