McHale & Co. Solicitors Blog

What good is a fine.......?

BBC’s Panorama programme last night and a report by Channel 4 news on Sunday (in which one of my clients was featured) has put the misselling of interest rate hedging products back in the spotlight, and rightly so. Both highlighted the problems with the Financial Conduct Authority (‘FCA’) redress scheme (‘the Review’) which we are dealing with on a day to day basis.

There was a concession from the FCA that it may consider fining the banks as a result of the scandal. What will this result in for the thousands of SME’s severely affected by the scandal? Nothing, apart from reducing the provisions made by the banks to compensate those affected!

The FCA’s job is to protect those who have been missold swaps and police the Review. It is failing. Forget fining the banks, a fine would be a trickle of water off a very large duck’s back.

The FCA should;

1.     Compel the banks to speed up the review.

Of the 70 cases that I am managing, we have only got two offers in settlement. This is not in line with the guidance on timescales issued by the FCA. 

2.  Amend the qualification criteria.

For example, the publicans featured on Panorama have been massively let down by the process. There are many others in the same boat. To conclude that a borrower is sophisticated on the basis that they turnover more than £10m or they have more than 50 employees is nonsense.  The test should be aligned to the understanding of businesses of the swaps and the fundamental and substantial risks they were taking on in entering into them.

3.     Allow advisors fees.

The banks refuse to pay for professional advisors incurred by a customer after 29th June 2012 on the basis that the review is straightforward and that the services of advisors are not needed. This is despite the fact that any claim for consequential losses will be assessed using legal principles.  It would be unfair for my chip shop owner client or farmer to argue with the bank on the legal principles of causation and remoteness.

4.     Deal with the administrator problem.

Many businesses have been forced into administration (usually by the bank) as a result of being sold these products. Administrators now run these companies which have valid claims. The Administrators (in my experience) have little appetite to pursue these claims despite pressure from the former directors and clear duties to creditors. The Administrators are appointed by (and paid by) the banks. One could reasonably suspect the reason behind this lack of appetite....

To be continued......



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