Sold in a rising market, prior to the recession, many SMEs and individuals were approached by their banks, either independently or whilst they were in the process of renewing or extending facilities, and encouraged to purchase complex products, sold as “protecting” them from increasing interest rates, by swapping their variable rate loan for a fixed rate. These products were known as Interest Rate Hedging Products (IRHP) or “swaps”.
FCA Investigation The FCA conducted a review of the sale of IRHP and issued its findings in June 2012. The FCA found “serious failings” in the sale of IRHP to SMEs and has set up a scheme to allow customers to seek redress from the banks.
The FCA reported in January this year that banks have completed what is known as “sophisticated assessments” and are now in the process of making payments to customers who were mis-sold. The review has so far discovered that 96% of SWAP products had likely been mis-sold and that redress is due.
In January 2014 alone, the amount of compensation paid out amounted to some £147 million, compared to the £159 million repaid, in total, in the previous eight months that the review process had been running. It is estimated that the total £306 million paid out to-date is less than 10% of the likely amount businesses are owed and it is understood that more than 9,000 businesses are currently awaiting confirmation as to whether or not they are due a payment from their bank.
Redress for customers Lindsays are involved in assisting clients in all aspects of this issue. We are advising clients on whether or not they qualify for the redress scheme, helping them to navigate the redress process, quantifying claims, attending meetings and conducting negotiations with banks. If you are in a situation where you believe that you were or may have been sold an interest rate swap product and would like advice on this please do not hesitate to contact us.
