In its review of the mis-selling of interest rate hedging products, the FSA reported on a number of cases of bad practice among British banks, including mis-selling.
As a result of the FSA’s investigation, the banks are required to appoint independent reviewers. These reviewers must be approved by the FSA and demonstrate sufficient knowledge of interest rate hedging products and the needs of the small and medium sized businesses (SMEs) they were predominantly sold to.
The FSA, which regulates the UK financial services industry, is committed to ensuring that the banks deliver the right outcomes for their customers.
Banks are urged to focus on giving redress as swiftly as possible and to write to all customers who have been sold interest rate hedging products.
The banks included in the FSA’s review include:-
- Barclays
- Lloyds
- HSBC
- RBS
- Allied Irish Bank (UK)
- Bank of Ireland
- Clydesdale Bank
- Yorkshire Bank
- Co-operative Bank
- Northern Bank
- Santander UK
The interest rate hedging products were designed to protect against the risk of interest rate movements. They include:-
- Interest rate swaps (which “fix” the interest rate)
- Interest rate caps (which cap interest rate rises)
- Interest rate collars (which cap interest rates by limiting fluctuations within a simple range)
- Interest rate structured collars (which cap interest rate rises by limiting fluctuations within a more complex range)
The FSA has agreed with Barclays, HSBC, Lloyds and RBS that they will not continue to market structured collars to customers.
The banks anticipate a substantial number of claims and it has been reported that Barclays has made provision for £450 million to cover its exposure.
In November 2012 the FSA wrote to customers that had been sold an interest rate hedging product warning that the banks may take up to a year to review cases.
Clearly an independent review that offers redress at no cost or risk to the victims of mis-selling has its attractions. However, it is still not clear exactly how the review process will work and what level of redress will be provided. It will also not apply to all customers who have been mis-sold products.
Legal action therefore remains the preferred option for many individuals and businesses who have lost out. Mis-selling claims can include recovery of payments made to service interest rate hedging products, including onerous breakage costs, along with any other losses incurred and the claimant’s own legal costs. The courts themselves have acknowledged that some cases need to be litigated.
Potential claimants must also remember that claims can become statute barred if court action if not pursued, so sitting back and failing to act could prejudice your position.
To find out where you stand and whether a formal legal claim would be in your best interest give our FREE legal helpline a call on 0808 139 1593 or email us at [email protected]
