Thousands of small businesses are in line for redress as a result of the way they were sold interest rate hedging products (IRHPs) by their banks.
In 2012, the Financial Conduct Authority (FCA) identified failings in the way that some banks sold IRHPs. The banks involved – including Barclays, HSBC, Lloyds and RBS – then agreed to review their sales of IRHPs made to certain customers since 2001, with a full review starting in May 2013.
Different types of IRHP, including swaps, caps and collars, were typically sold to businesses taking out a loan with a bank and were designed to provide protection against potential rises in interest rates.
But when interest rates fell as a result of the global financial crises, affected firms – who said they had entered agreements without being full informed of or understanding the risks – found themselves facing challenging costs. Other problems reported include IRHPs that were longer than the terms of the loans and high exit fees.
The Fact’s RHP review is designed to deliver “fair and reasonable redress” to customers that banks have identified. The FCA says the only action customers need to take to have their case assessed is to opt in to the review, when invited to do so by their bank, and then share any relevant evidence on how the sale was conducted.
Caravan and holiday parks are likely to be among the businesses affected by their purchase of an IRHP. Such businesses will typically be offered eight per cent simple interest on top of redress payments, under a standard approach used by the Financial Ombudsman Service.
However, businesses may be interested in pursuing claims for consequential losses as a result of the way an IRHP was sold and Milsted Langdon’s forensic accountancy specialists in Bath, Bristol, London, Taunton and Yeovil can provide expert assistance in these areas. For more information on IRHPs, please contact us.