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FCA Review of Swap Misselling – Update

Posted on Sep 25, 2014 by Liina Tulk  | Tags: FCA Review Process, mis-selling, compensation, delay, consequential losses, redress, additional information,  | 0 Comments

By Liina Tulk, Solicitor, Dispute Resolution

Background

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.

Going Forward

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.

Additional Information

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.

Consequential Losses

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.

Conclusion

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.

Contact Us

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.

Disclaimer: While every effort has been made to ensure the accuracy of this blog post, it is not intended to provide legal advice as individual situations will differ. No recipients of content in this blog post should act or refrain from acting on the basis of the blog post without seeking the appropriate legal advice on the particular facts and circumstances at issue from a qualified solicitor in their jurisdiction. The blog post is for general information only and is not legal advice. The law changes frequently and varies from jurisdiction and jurisdiction. No solicitor-client relationship is formed nor should any such relationship be implied. If you require legal advice, please consult with a solicitor qualified to practise in your jurisdiction.  Should you be interested in seeking our assistance with a legal matter, please contact the Dispute Resolution team on 0131 226 8200.

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