If you purchased Interest Rate Swap, Cap or Collar – the final date to complain to your Bank is 31 March 2015
In 2012 the Financial Services Authority (now the FCA), identified a number of failings in the way the banks sold structured collars, swaps, simple collars and cap products (IRHPs) to small and medium size businesses. As the result, nine of the largest UK banks agreed to undertake a review of all their sales of IRHPs since as early as 2001.
The full review then started in May 2013 and the banks have now sent redress determination letters to all of the 17,000 businesses that were in the review. So far, as much as £1.8 billion has been paid in redress, including £365 million in respect of the consequential losses caused to the businesses as the result of entering into IRHPs.
The Banks that agreed to take part in this review are: Barclays, HSBC, RBS, Santander UK, Lloyds, Bank of Ireland, Co-operative Bank, Clydesdale & Yorkshire Banks and Allied Irish Bank (UK).
What you need to do
Firstly, you have to make a complaint to your Bank about the product that was sold to you or your business, e.g. structured collars, swaps, or simple collars. You have to indicate in your complaint that you want the way in which the product was sold to you, or your business, to be included in the IRHP review scheme.
The FCA advises that in order to make a complaint to your Bank, you need to write to the Bank’s complaints department – the address can usually be found on your Bank’s website. Alternatively, you can raise your concerns and lodge your complaint with your relationship manager at the Bank, or speak to your legal adviser.
Interestingly, the FCA reports that so far, only 1,000 out of 7,000 customers have complained to their Banks about their IRHPs products.
If you were sold one of the interest rate hedging products at any time between 2001 and 2012, the final date when complaints will be considered within the IRHP review will be 31 March 2015.
What happens next?
Most of the customers that complained so far, have received a redress letter from their Bank, which may have included a cash redress offer. The redress offer normally consists of the following: the basic redress, interest and consequential loss.
The cash redress should be determined on the basis of putting you back in to the position you would have been in, had the regulatory failings not occurred. For example, if you can show that you would never have purchased a hedging product because you, in fact, never needed one, you may be entitled to a full refund of all payments made by you. Alternatively, if it is established that you were not required to enter into a product that provided protection against interest rate movements, but may have chosen an alternative product – you will receive redress based on the difference between the payments you would have made on the alternative product, compared with the payments you did make.
The interest will be calculated on the sum of money that has been awarded to you as a basic redress at either; 8% a year of simple interest, or at an alternative level of interest you would have earned, had you placed this money somewhere else.
In addition to the basic redress and interest, you can potentially claim for consequential loss, such as; loss of business opportunity, loss of profits, associated bank charges, legal expenses and overpaid tax.
If you already made a complaint
If you have already complained to your Bank and received a redress letter, we recommend that you carefully consider the compensation offered and review the Bank’s reasoning behind the offer. Analysis of redress offers carried out by derivatives experts show that, in some redress cases, the businesses are offered replacement cap products at a price that does not represent the fair market value, leaving the businesses overcharged for the second time.
We can help
If you were sold an Interest Rate Hedging Product, the FCA urges you to make a complaint before 31 March 2015. Our team of dedicated lawyers can assist you with the assessment of your case, help you to prepare an effective letter of complaint to your Bank and ensure that you receive fair redress. Please contact the Banking & Finance Litigation department on 01202 525333.