Have you lost from mis-selling of interest rate swaps or other hedged lending products?
Thousands of individuals are the victims of mis-sold interest rate swaps and other similar products. A number of banks including Barclays, HSBC and Lloyds were implicated in this matter. The FSA (now the FCA) was swamped with complaints from individuals as well as small/medium sized enterprises. The FSA intervened, conducted a review and published its findings in June 2012.
Interest rate hedging products are intended to provide customers with certainty over future loan repayments by doing one of the following:-
- fixing the interest rate (referred to as “swaps”);
- placing a limit on interest rate increases (“caps”);
- allowing the customer to limit interest rate fluctuations within a particular range (“collars”), or
- allowing the customer to limit any interest rate fluctuations in a particular range (“structured collars”).
The FSA found that these products were mis-sold in a number of ways. Most of the misunderstanding took place between 2005 and 2008. The specific ways in which the products were mis-sold include:-
- mismatching between the term of the loan and the length of the product;
- mismatching between the amount of the loan and the product;
- inadequate explanation of the risks;
- inadequate explanation of exit costs;
- sales being driven by incentives and rewards, rather than by the needs of the customer; and
- the banks also failed to comply with their regulatory obligations under the FSA Conduct of Business Sourcebook.
Whilst the banks have agreed to provide redress to clients in the case of the sale of structured collars sold to certain types of clients, and to review the sale if a complaint is made by a client during the period of review in the case of the sale of caps to a certain type of client, it remains to be seen exactly what will be offered and what the outcome of any review will be. Where swaps or collars were sold, the banks have agreed to review the sale and to contact all such clients to propose “fair and reasonable redress”. It is quite possible that there will be a discrepancy between what the clients believe constitutes fair and reasonable redress and what the banks think constitutes such redress. It is important to ensure you receive the full recompense.
If clients are not content with the outcome of the review then they retain the right to complain to the Financial Ombudsman Service or to issue proceedings in Court.
If you think you are a victim of mis-selling and would like advice in relation to this because you believe you have been mis-sold a hedging product, then please contact Zahira Hussain and you will then be advised of the steps you need to take.
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