McHale & Co. Solicitors Blog

Interest Rate Swaps - Review Updates

One of our clients has recently had a “review update” from Barclays and I think it is worth sharing some of my thoughts on it. 

Firstly I am very encouraged by it.  They are certainly on the right tracks and I believe that with the appropriate help and guidance they will eventually offer the client a fair settlement.

The headline is that the review findings on the point of sale has concluded that the bank should cancel the IRHP backdated to the original sale date. (in this case this amounts to a significant cash payment proposal in the low to mid six figures). In order to come up with a final redress decision the bank say that they will pay the above; what they call the “point of sale review” and also “Any payment in relation to other losses incurred as a result of the sale of your IRHP”

The next step is that the bank will provide us/our client with “supporting information” and also an “additional information questionnaire”. Effectively the additional information questionnaire is an opportunity to set-out consequential losses.  This is where I part company with the bank in terms of the fairness of what they say earlier in the document.

In a section entitle  ”Important Considerations”  they say: 

“In respect of redress, please note that we will not generally compensate you for costs of your professional advisors incurred after 29th June 2012. In exceptional circumstances where it is fair and reasonable to do so, we will pay reasonable advisors’ fees after that date if necessary for you to understand our offer of redress”

This is a sentence that is both ill at ease with itself and completely unfair. If they are really going to apply a “reasonableness” test to professional fees then that is ok. But given the use of the term “in exceptional circumstances” it appears that they have no intention of applying a reasonableness test at all.

The reason that they quote the 29th June 2012 is that that is the date that they announced the review and got the FSA/FCA to do their bidding and discourage people from taking professional advice.  (The lie told to clients then by the FSA/FCA has led to potentially serious consequences for at least one client that I have seen, who relied upon this advice and has not let Limitation pass unwittingly and will not have recourse to the Courts if the redress process fails them). So in that sense it appears to have some logic.

What it fails to take into account is the following:

  1. That in the Pilot Findings report the FSA/FCA say quite clearly that : “The banks will use an established legal approach to determine consequential losses, which will involve consideration of
    whether the los was caused by the breach and whether the loss was reasonably foreseeable at the time of the breach of the regulatory requirements. This is the approach used when considering loss claims in tort and for breach of statutory duty.” (my emphasis).
  2. Accountancy evidence will clearly be needed to quantify consequential losses-indeed it will assist the bank in their decision making process-the only need for a client getting this work done by an
    accountant is as a direct result of the banks regulatory breaches.

Clearly professional assistance is needed by clients. It is entirely reasonable. It is needed as a direct result of the banks behavior. It would be helpful if they just said that they would pay professional fees that are reasonably incurred and leave it at that. I am sure that this is where they will have to get eventually. A well prepared case will make their life easier and they could actually easily offset this additional cost against savings that they will make on not instructing large law firms and accountancy practices to do the work on their behalf. Or how about not needing an independent reviewer to review a
decision made when a client is advised by a qualified  solicitor of accountant? A cost saving tip to the banks given by me free of charge!

So the real news is that (a) cheques will be on the way to some clients in the not too distant future (hurray - but not a moment too soon!) and (b) the banks really cannot be trusted to  treat their customers fairly when they are still going out of their way to put them off getting the help that need and deserve to ensure that they are fully compensated.

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