In 2012 the FCA identified failings in the way some banks had sold interest rate hedging products (IRHP). In May 2013 a full review commenced into the sales of IRHP to unsophisticated customers.
FCA Review Process until June 2014
According to the FCA website, all nine banks have now completed their sales reviews of customers who joined the review before March 2014 and have delivered redress letters to majority of these customers.
In particular, the banks have sent 16,000 redress determinations to customers. Of those 13,500 include a cash redress offer and 2,500 confirm that the IRHP sale complied with the FCA rules or that the customer suffered no loss.
To date, around 8,000 customers have accepted a redress offer and £1.2 billion is being paid out. In addition to the £1.2 billion of redress payable to customers, the banks have set aside money to cover the costs of having to get out of these products (the payments customers would have made in the future), the costs of employing more than 3,000 people to carry out the exercise, and the costs of engaging independent reviewers to look at every case.
The FCA reports that since March 2014, approximately another 1,200 customers have chosen to join the review. Of those, around 200 have already been determined, with the reminder to be dealt with over the next few months.
Customers who have received an offer they are not satisfied with have the option of providing the banks with additional information that was not supplied the first time around with the aim of persuading the banks and independent reviewers that the initial redress offer should be reconsidered.
Customers can also ask the banks to provide them with more detailed explanation of the reasoning behind the decision reached. From experience, we have found that it can assist assessing what additional information to provide to the bank if more detailed explanation of the reasoning behind the redress offer is provided.
On top of basic redress offers, the banks and independent reviewers continue to assess customers’ claims for consequential losses. Every redress offer has 8% simple interest per year added which is intended to compensate customers for the lost opportunity cost of being deprived of their money. That said, customers who are able to prove that their consequential losses caused by the mis-sold IRHP exceeded 8% per year can submit a consequential loss claim.
We have found from experience that there is a fairly high threshold to meet when proving consequential losses and often expert input is required (e.g. forensic accountants report) that comes at an additional cost.
The FCA review process into the mis-sale of IRHP continues. While majority of our clients have by now received their offer letters, several of them have chosen to submit additional information to the banks and independent reviewers. We are still to receive the banks' responses to these additional submissions. Considering the timescales so far, it may be another few months before substantial responses are received.
We have expertise in financial mis-selling disputes and have recovered clients' losses from their banks.
If you have been affected by mis-selling we may be able to provide you with the necessary legal assistance to seek recovery of your losses from you bank. Please feel free to call a solicitor within the Financial Disputes Team on 0131 226 8200.
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