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We look at whether victims of Interest Rate Swap mis-selling will need a lawyer to assist them with obtaining redress
An article in THE INDEPENDENT published, just five days after the FSA Interest Rate Swap announcement, commented:
‘within half an hour [of the announcement by the FSA], six “claims management” firms had got in touch offering their view on mis-selling and, naturally, their services to small businesses that might be due compensation. The words "claims management" are in quotation marks because these companies are little more than ambulance chasers. Having heard that the final bill for the banks may be as high as £10bn, these parasites are already working out how to get a slice of the cake, just as they have so ruthlessly done with payment protection insurance mis-selling.’
A harsh comment to be sure but the journalist is correct in that many so called ‘claims management companies’ are getting on the band wagon and trying to cash in on what they see as a lucrative new area of work. Hard time were predicted for these claims farmers following reforms to the personal injury claims referral market and many such companies are likely to see IRS as a ready made replacement.
Before dealing with the issue of the unqualified claims companies, the first issue to be addressed if whether people need independent legal advice at all.
Do victims of mis-selling actually need legal assistance?
The FSA report on Interest Rate Hedging Products (‘IRHP’) stated that
‘the pilot confirmed our view that independent reviewers play a vital role in this [review] exercise. The independent assessors reviewed each case in the pilot (as they will do for the full review). We saw evidence of the independent assessors challenging the bank’s views on both whether the sales met [the FSA] regulatory requirements and on redress, and the views of the independent reviewers prevailed.’
These are heartening words, particularly given that the report goes on to state that the Big Four banks (Lloyds Group, Barclays, HSBC and RBS) have all agreed to adopt the full review process - which presumably includes the adoption of the role of the independent reviewer. In those circumstances, it would seem that dependent legal assistance is not required.
However, we would hesitate to endorse such a bald statement. The review system is limited in scope. It will depend on the type of Interest Rate Swap product you have been sold as to whether you automatically fall within the review scheme. There are four such categories:
If you are a non-sophisticated customer who was sold a structured collar, then you will automatically fall within the review scheme. In these circumstances, you probably will not need any independent professional legal assistance. The banks will review your claim automatically and have assured the FSA that they will provide reasonable redress. If however, you are dissatisfied with the outcome, at that stage, you may wish to review whether or not you need legal assistance.
If you are a non-sophisticated customer who was sold an IHRP (other than a cap or structured collar), then there will be a review but not necessarily an automatic review. You may need ad-hoc professional assistance here for although there is not an automatic review, you will need to lodge a claim. You may want some assistance in dealing with such determinations as to whether you fall in the category of ‘non-sophisticated’ customer and details of your losses, particularly ‘consequential losses’. Once you have started your claim though, legal assistance may not be required any further - unless the redress is less than you believe you are due.
If you are a non-sophisticated customer who was sold a cap, then your matter will be reviewed only if you make a complaint. You are starting to get into the realms of complexity at this stage as it will start dealing with legal notions. You may want to seek professional legal assistance to ensure that your interests are being best served.
If you are a sophisticated customer, an SPV or the value of your IHRP is greater than £10m, then you will not fall within the review programme and you will need to bring a claim through the courts. In these circumstances, you are likely to need legal assistance.
Where should mis-selling victims go for professional advice?
So having decided that you required independent, professional legal advice, who should you turn to?
Essentially you have two choices
- A firm of solicitors
- A claims management company
Should I use a claims company?
Claims Management companies are usually staffed by non-legally trained personnel, overseen by one or two legally qualified staff. Claims tend to be processed along a specified route of standardised actions and correspondence. These processes might be adequate for simple claims, like a road accident - though even that is debatable - but when a case becomes more complicated and therefore falls outside the systemised procedure, the Claims Management companies begin to struggle. The unqualified claims handlers’ do not have an adequate grasp of legal concepts and the risk of bad advice arises. Unlike solicitors, these companies are not obliged to carry insurance, so if things go wrong consumers could be left without redress,
If you require assistance for simple matters (such as the automatic reviews), a claims management company may suit your needs but their charges are generally in line with what a solicitor would charge (and often higher) so there isn’t much to be gained from opting for an inferior service. We would not recommend them for claims outside the automatic review scheme. .
Whilst solicitors are very strictly regulated and under a duty to ensure that their advice is tailored to what is in the best interests of the client, that isnt the case with the claims companies. As with the PPI scandal, we fear that people will be encouraged to seek legal assistance in situations where it is not strictly necessary. The FSA have made it very clear that for the simple claims that we have mentioned, the system they have set up is designed to ensure that the matter can be dealt with swiftly and simply without the intervention of an adviser.
You also need to give careful consideration as to how the Claims Management companies are going to fund your claim: usually it is by receiving a percentage of your damages. For such a simple claim, many people might prefer to keep the money themselves.
Should I use a solicitor?
For the claims that will come under the automatic review, we would recommend that people think very carefully about whether they need independent advice at all. As solicitors, its our duty to consider what is in your best interests, so if we think that you don’t actually need independent legal advice we will tell you so and you wont incur any legal fees. As we have said, the FSA have set the system up to provide redress to those who have been sold structured collars and so at this satge we think its reasonable to believe that these claims can be dealt with without any professional assistance.
Of course, many people feel more comfortable having a lawyer look after their affairs. They might not have the time to deal with matters themselves or struggle with the paperwork. If you fall into that category we will be delighted to help, but in the first instance we will always review whether and to what extent you actually need to retain a solicitor.. .
For the non-sophisticated customer who was sold an IHRP (but not a cap or a structured collar), then, as hinted above, you may want to get some professional legal assistance at the outset with preparing your complaint and possibly even to review the final outcome. You can use a Claims Management company but you will probably be better served by using a qualified solicitor specialising in commercial litigation who has a proper understanding of the legal concepts and more experience in negotiating settlements. Solicitors also have the added advantage of being properly regulated and adequately insured.
As for the other third category, we would definitely urge you to take advice from a solicitor. It may be that the solicitor will simply give you advice on how to conduct your claim, assisting you with drafting the complaint etc. and then you deal with the day to day management of the claim. Alternatively, the solicitor may deal with the claim in its entirety. But either way, I would recommend you get assistance from a qualified legal representative.
For all other claims, you will need a solicitor. Claims Management companies do not have the necessary expertise or qualifications or indeed the right to represent you in court proceedings.
Can Slee Blackwell help?
We can help you with all four categories of claim here even if, in the first type of claim, it is simply to recommend leaving the matter in the hands of the bank. We are also able to give you ad-hoc advice as and when you need it so that you can progress your claim in the full knowledge that you have legal advice and assistance at the end of the phone. Alternatively, we can take your claim on for you. We have a team of fully qualified solicitors, experienced in dealing with claims like this on a no win- no fee basis, as well as the assistance of barristers who have run IHRP claims and qualified accountants who specialise in quantifying losses.
In any of these situations, we will use our best endeavours to find the most suitable level of service and assistance that you need and you will have the peace of mind of knowing that your team is fully qualified and have the necessary experience to deal with a case of this nature.
For FREE initial advice on where you stand and the options open to you give us a call on 0808 139 1595 or email solicitor Emma Slade at firstname.lastname@example.org