McHale & Co. Solicitors Blog

Financial Ombudsman Service (FOS) and Interest Rate Swaps

The Financial Ombudsman Service has just published it’s 2012/2013 annual review of consumer complaints. You will know from our recent blogs that we are experts in Interest Rate Swap claims and banking litigation so this is of great interest to us.

The Headlines:

  1. A 92% increase in new cases that FOS has taken on in the last year making it 508,000 in total
  2. 75% of complaints related to mis-sold PPI (an area in which we took the banks all the way to the Supreme Court and got a favourable settlement)
  3. 2,000 new cases referred  each day.

Swaps Mis-selling in particular

On 24 October 2012, FOS published two provisional decisions relating to SAAPS They set out the issues involved in disputes over “swaps” and “collars” between banks SMEs. They wanted to explain their general approach to complaints.

FOS received 258 complaints about SWAPs in 2012/13. They stated that they are generally unable to take on cases where a business does not meet the definition of a “microenterprise” as set out  in the FCA rules. The rules define a "microenterprise" as a company with less  than 10 employees & a Turnover or Balance Sheet of less than £2 million). Only “microenterprises” come under the FOS’ jurisdiction.

So basically FOS are not going to deal with many of these cases. Remember that the maximum amount of compensation that FOS can award is “only” £150,000. That being said it may prove still to be a viable route for some. This will really be judged in light of the effectiveness of the FSA/FCA redress scheme.

FSA rejected a FOS Swaps Review

In January 2013 the FSA/FCA rejected a FOS’s suggestion that it should establish a special scheme so they could deal with SWAPS cases. The  FSA rejected this following consultation with ”stakeholders” and said it was not appropriate to have the FOS set up such a  scheme.

Instead the banks agreed to review SWAPs themselves. It’s hard to resist the conclusion that once again the banks played a blinder here; clearly they were the most significant “stakeholder” and did well to avoid independent review from a body that was upholding 77% of PPI complaints against the same institutions!

An Appeal Body for FCA Review Appeals

Despite it’s rejection of the FOS special scheme, FOS is still the FCA’s intended last resort for appeals from the banks own review to be to FOS. How this will work in practice I am not sure.

What they say at the moment is that if after the review you are not satisfied with the level of redress you may be able to refer your complaint to FOS and that it will independently review all eligible cases. Also they say that  if you believe you have incorrectly been classified as a ‘sophisticated’ customer and have, therefore, not been eligible for redress, you can complain directly to your bank. If you are then not happy with your bank’s response you may be able to refer your complaint to the Ombudsman.

Not particularly helpful stuff that poses as many questions as it answers. There is a hint of a turf war over jusrisdiction here too. The FCA seem not to have wanted to let FOS in on the act. There are vested interests at play within these organizations. That’s before you even get to pressure from the banks and

On balance I think that any appeal to FOS is unlikely to be a way forward. We are gearing up all of our cases as though they will eventually be litigated in the Courts. This is the most effective way of avoiding that in the first place. A well presented case is less likely to end up in dissatisfaction: sis vis pacem para bellum as we say!

Finally a reminder about Limitation; the clock is still ticking! If you think you can do this alone then in all sincerity I wish you the best of luck; but please, please, please get a “standstill agreement “ on Limitation with your bank!

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