McHale & Co. Solicitors Blog

Interest Rate Swap claims - latest FCA update.

The FCA have issued their latest update on the Interest Rate hedging product scandal today. I can’t help feeling that they sound like the publicity arm of the big banks at times. They believe that the banks “remain on track to provide a redress determination to all customers within 12 months of starting the review”. This really is the most incredible spin. It fails to point out the fact that they are not treating the start date as the when the review process was set-up. So it’s 12 months from some unspecified date!

The redress determination does not take into account any consequential losses which by their own admission are “likely to take longer to assess”, so it seems fanciful to suggest that anything like a final redress determination will be forthcoming within 12 months for a huge number of customers. The final sleight of hand is to not actually say that the redress (the money that the victims so desperately need) will be paid within the timescales envisaged - it’s just the determination. In our experience the banks are taking an unjustifiable amount of time between determination and actually making payment. But to read the FCA update you would think that all in the garden was rosy.

The FCA don’t waste an opportunity to help the banks out by peddling the line that “The IRHP review has been set up to deliver fair and reasonable redress to customers where appropriate without the necessity to use lawyers……(although some customers may want to consider seeking legal advice if they are considering a separate legal action)”.   I am sick of pointing out that for many the time will have passed when they can take legal action as a direct result of people trusting the FCA “advice” on this subject. Thousands will be time-barred from making a claim by the time they wish to take such action: i.e. if they do not get justice through the review. Given that the FCA have seen fit to now use the caveat in the brackets above, it is a shame that they don’t take the time to simply and properly advise people that they only have six years in which to make a claim and that they should consider a standstill agreement with the bank in the meantime. I don’t think it takes a cynic to question why they haven’t done this simple piece of consumer protection.

Of note in the update is the fact that 3,100 customers are yet to opt into the review. They say that over the next few months the bank will start sending out “final reminders to encourage as many as possible to participate, before the review is closed for new entrants”. It would be hoped that other efforts will be used to get these people in the review before they close the doors.

The other interesting aspect of the latest update is what appears to be the start of an attempt to put people off claiming consequential losses. The following is an extract from the update:

“The banks have agreed to offer customers 8% simple interest on top of redress payments and which is intended to compensate customers for the opportunity cost of being deprived of their money (e.g. lost interest or profits).  For many customers, taking into account the economic environment over the last five years, this will represent a straightforward and fair alternative to putting together consequential loss claims which are likely to take longer to assess. Independent reviewers will oversee the review process from start to finish, ensuring that the outcomes provided to customers are fair and reasonable.”

Of course each customer needs to look seriously at their consequential losses. In many of the cases we are dealing with those losses are greater than the direct losses. From their own website the FCA deal with what losses can be recovered and the way they are assessed:

“Consequential losses will be assessed by referring to established legal principles relating to claims in tort and breach of statutory dutyCustomers should be aware of some of the legal tests, which in broad terms are:

  • The mis-sale must have caused the loss (i.e. the loss would not have happened had it not been for the bank’s regulatory breaches).
  • The loss must not be too “remote”.  That is, the loss must have been a reasonably foreseeable outcome of the bank’s regulatory breaches (i.e. the bank could have reasonably foreseen that its regulatory breaches could result in those losses).
  • Only claims that are supported by evidence will be considered.  For example, documents that were created at the time the loss was suffered are likely to be very relevant.

There is no exhaustive list of types of loss that can be claimed as consequential loss (assuming they meet the legal tests). “

My emphasis added by the underlining. It really does beggar belief (and run contrary to the “established legal principles” ) that just below this the FCA say:

“Legal and professional fees

Fees incurred in relation to dealing with the consequences of the mis-sale may be recoverable (for example, the cost of professional advice about restructuring the business to deal with the IRHP payments).  However, costs (such as legal fees) incurred as part of any legal process to recover compensation are unlikely to be claimable. 

Customers should consider carefully before using lawyers or claims management companies in the review process, as the review process is being overseen by independent reviewers and such costs are unlikely to be recoverable.  “

I know I sound like a broken record, but where there is “no exhaustive list” of what can be claimed (i.e. advice required) and where we need to refer to “established legal principles” and apply the latest cases in “tort” and “breach of statutory duty” it’s incredible that the FCA appear to be actively discouraging people from getting lawyers involved. Something is wrong here - they either are going to follow established legal principles in which case reasonably incurred fees will be recovered, or they are not. The banks can’t have it both ways. I think the truth is that the FCA will be forced have to apply the principles they have espoused and will pay reasonably incurred legal fees as part of consequential losses claims. But maybe they already know that. The poodle of the banks is just hoping that it’s yapping will put enough people off asserting their rights to get true “fair and reasonable redress” to keep the banks happy. 

Categories: Interest Rate Swaps

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