Latest insights from our experts
Bank shock ultimatum to victims of swaps mis-selling
Barclays has given customers participating in the FCA backed review of the sale of interest rate hedging products until 15 October 2015 to accept the bank’s redress offer or receive nothing under the review. The other major banks implicated in the scandal, including RBS, Natwest, HSBC and Lloyds are expected to follow suit. The FCA seems to be offering no resistance to the bank’s move.
The reason many customers have rejected offers is that the bank, despite admitting it mis-sold the original product, is still not offering a full refund. Instead the bank forces customers to declare that even with correct advice they would have purchased a hedge product – just a slightly less damaging version than the one they were actually sold. The customer is then offered the difference between the cost of the original product and the slightly more favourable alternative. The price of these alternative products is often inflated in order to minimise the compensation owed, with analysts revealing that the banks are in some cases making profits in excess of 30 times the market rate on replacement products. This can reduce compensation offers from millions to tens of thousands of pounds. To make matters worse, payments owed by customers under interest rate swaps that were suspended while the review was ongoing become due once it ends. This will force many businesses into insolvency.
There is no right of appeal in the review so until recently, customers unhappy with the outcome could do little about it. But a recent High Court decision in favour of a client of Tozers against Barclays has opened up the possibility of victims of mis-selling to challenge the bank’s conduct of the review in the courts, even when they are out of time to bring a claim based on the original mis-selling.
It is vital that customers who have had their complaints rejected or received low offers take advice to ensure they obtain the maximum compensation possible. With a deadline of 15 October 2015 now set by the Barclays the need for advice is urgent.