I have been asked what the dangers or pitfalls for businesses and clients would be in merely sitting back and waiting for the Banks to sort out the issues surrounding interest rate hedging products (IRHPs). The Banks have split down IRHP into three categories of the likelihood of mis sell. In essence, Category A are the most complex structured collars and collars; Category B are swaps; and Category C are caps.
For Category A products the Bank will contact the affected parties and will review their product for them. For Category B products the Banks will contact the affected parties but will only review the product if a complaint is lodged or request made to review the IRHP. For Category C products the Banks will only review the IRHP if the affected party contacts the Banks in the first instance.
The risks for Category B and C IRHPs are therefore that unless you make contact with the Banks and lodge an appropriate letter of complaint or request for review then you may not be offered any redress or compensation at all.
For all products there is the risk that the offer of redress and compensation is merely fair and reasonable and not however a true reflection of the parties actual losses. Any redress offered by the Banks should be fair and reasonable and put the customer back in the position they would have been in had they not been mis-sold the IRHP. The FCA Review process does not necessarily provide legal redress rather regulatory redress which may provide less compensation than available at law. The redress in the FCA Review may not be as comprehensive and fair as legal redress via the Courts which is designed to put parties into the position that would today exist as if an IHRP had never been entered into.
There is a concern that even where the Review finds the IRHP has been mis-sold, the redress offered may be substantially less than the customer would be entitled to through the Courts. The Banks may argue that reasonable redress would be to switch the customer to a more appropriate IRHP. The customer would still then be tied into an IRHP they potentially did not require at all, rather than being put into the position they would have been had they not been mis-sold an IRHP.
We have experience and expertise of the financial, banking and legal process and as truly independent experts, if you have any questions or concerns regarding the FCA Review process or IRHPs then we are more than happy to answer any questions you may have, advise whether you have a claim, what would be the best course of action to take and what would be an appropriate “fair and reasonable” offer of redress.
For any questions please see my Ask Me Anything article – Interest Rate Swap claims CLICK HERE