The FCA has provided an update on the progress of its interest rate hedging product (‘IRHP’) review scheme (the ‘Review’), including a deadline for submission of complaints.
The FCA has confirmed that 31 March 2015 will be the closing date for entrants into the Review. It has directed the nine participating banks to remind eligible customers of their right to complain, and to prompt them to lodge responsive complaints as soon as possible if they wish to participate. The reminder is targeted at those customers who purchased cap products, for which a different procedure applies. This variety of product will only be included in the Review if the customer proactively complains to the relevant bank.
In 2012, the FCA was alerted to certain failings in the way in which some banks had sold IRHPs including interest rate swaps, collars, and cap products. The banks (Allied Irish Bank (UK); Clydesdale & Yorkshire Banks; Lloyds Banking Group; Bank of Ireland; Co-operative Bank; Royal Bank of Scotland; Barclays; HSBC; and Santander UK) consented to review IRHP sales made to their non-sophisticated customers (i.e. those classified as ‘private customers’ (for sales transacted on or before 31 October 2007) or ‘retail clients’ (for trades entered into on or after 1 November 2007), and assessed as eligible for the review under the ‘sophistication test’) from 2001 onwards.
The Review commenced in May 2013 and banks have since distributed redress determination letters to approximately 17,000 customers that are in the Review, 14,000 of which include cash redress offers. Last week the FCA provided updated statistics indicating that approximately 11,000 customers have accepted a redress offer and £1.8 billion is being paid by the banks in aggregate compensation, including £365 million to accommodate consequential loss complaints. Banks have also had to set aside considerable financial resources to cover the cost of early termination of complainants’ IRHPs, as well as employing staff to administrate the review exercise. The process has triggered an unparalleled level of customer engagement.
After the deadline customers will continue to be able to raise IRHP mis-selling complaints through banks’ internal complaints processes. They may also in certain circumstances be able to refer complaints to the Financial Ombudsman Service. This option is generally open to private individuals, and businesses that are ‘micro enterprises’, as long as they have an annual turnover of less than two million euros, or approximately £1.59 million, and fewer than ten employees (for further details, please refer to the FCA website). Customers may also be able to commence litigation against the relevant bank, although this will be subject to limitation restrictions.
By Marc Samuels