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Posted on Aug 07, 2015 by Liina Tulk  | Tags: mis-selling, interest rate hedging products, FCA Review, RBS, Barclays, Suremime Limited v Barclays Bank Plc  | 0 Comments

Uneasy waters so far

The English High Court’s decision is another in a series of blows against the banks and independent reviewers involved in carrying out the FCA Review Programme of Swap Mis-Selling. I blogged back in May (see blog here) about the Bully Banks pressure group taking steps to judicially review the FCA and their flawed compensation scheme, as well as Holmcroft Properties success in being allowed to judicially review KPMG, the independent reviewer of Barclays’ compensation scheme. No-one up until now had actually raised a claim against a bank for failure to comply with the review scheme. That changed when at the end of last month the English High Court allowed Suremime Limited’s claim to proceed against Barclays for the bank’s alleged failure to comply with the specifications it had agreed with FCA under the Review Scheme.

The storm is picking up

Several of MBM’s clients have been disgruntled, to say the least, about the FCA Review scheme and in particular about the way the banks have conducted the reviews. Unlike the PPI compensation scheme that has been a general success for miss-old customers, the Swap Mis-Selling Review has very much left all the power with the banks who mis-sold the products in the first place. It is clear that the banks have once again taken advantage of their position of strength.

In several of the reviews with which we have been involved,the banks, especially RBS, have reached decisions that seem to take no account of the evidence provided to them by our clients and are very much favouring the bank’s position, as opposed to what the most likely reality would have been had the banks not mis-sold the products in the first place. While it was apparent that the review process was unfair and flawed, it was unclear whether a claim could actually be brought against the banks in court for their failure to conduct the review fairly and reasonably.

The High Court decision in Suremime Limited v Barclays Bank Plc  has shown that such a claim may be possible. Although it still remains to be seen whether Suremime is successful at the final hearing, this has been the first big step to bring the banks to book for the flawed way in which the FCA Review has been carried outThe Suremime decision has shown that if customers can demonstrate that their bank acted negligently when carrying out the review, in the sense of not applying the rules agreed with the FCA at the time that the Review was agreed between the FCA and the banks, then it may be possible to recover damages against the bank.

The perfect storm ahead?

The Suremime decision has opened a door to claims by customers who believe that their bank has not fully complied with the terms of the agreements with the FCA under the Review. While a lot of mis-selling claims themselves may be time barred due to the swaps having been sold more than 5 years ago in Scotland or 6 years ago in England, any claims against the banks the banks for acting negligently under the Review are still within the prescriptive period given that the Review started during the second half of 2012 and most final decisions were made in 2013 and 2014.

In particular, ultimate success in the  Suremime case will permit others to  claim against their banks for failures to properly award losses under the Review (as opposed to simply make an arbitrary decision on what expensive alternative product to substitute the original swap with) and hence provide with fair, just and reasonable compensation. No doubt the banks will vigorously defend such claims by alleging that they did not act negligently and that they properly complied with the Review. However, it may just be that the tide of judicial perception about banking behaviour is turning.

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If you were mis-sold an interest rate hedging product and believe that your bank did not provide you with proper redress or you have any queries arising from this article, then please contact our Dispute Resolution team on 0131 226 8200.

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