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Interest rate swap redress offers double

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11th Feb 2014
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Figures from the Financial Conduct Authority (FCA) show there has been an almost twofold increase in the amount of redress paid to those missold interest rate swap and hedging products in January 2014.

According to monthly updated figures by the regulatory body, there was £306.3m paid out to businesses missold Interest Rate Hedging Products (IRPHs) in January, up from £158.6m in December. 

Banks set aside £3.75bn for the redress scheme, which started in May last year after the then Financial Services Authority (FSA) found that 90% of IRHPs could have been missold. More than 30,000 cases were reviewed by the FCA to assess whether they may be eligible for compensation by banks such as HSBC, Lloyds, RBS and Barclays.

Data also showed that out of the 9,000 accepted into the scheme, 2,092 have accepted their offers of redress.

The review has been completed as of January, and the most recent figures show that 81% of businesses contacted by banks have opted in to the scheme. 

Daniel Hall from interest rate swap specialists All Square Treasury warned that the 3,100 businesses yet to opt in need to do so before it is too late. 

"There's potentially an awareness issue. Are these businesses apathetic? Do they not understand or simply do they not want their cases reviewed? They need to know that if they do opt in, there's a very high change the product they have is going to found to be missold," he said.

However just because a product is deemed as being missold does not mean that entitles the business to full compensation, he added. 

"Around 60% of those missold products are getting the full amount, and 10% nothing at all. The reason why is because as part of the review, the bank is determining if business would have taken that product in any event. If so, the bank has caused no loss to the business." 

When the review started, it was criticised for being too slow and complicated by lobby groups and specialists, but appears to have gathered pace since the first redress offers were sent out in August 2013.

According to FCA data, most banks are aiming to have the redress and review process 100% complete by this summer, but Hall thinks that it will be autumn before everything is fully complete. 

"On the one hand, the review process started off quite slowly. But I think over the last month, banks have really picked up the speed of which they are processing cases. The banks are throwing a lot of resource at this and are under pressure by the FCA to get it over and done with, which I think they'll do by this autumn," he said. 

Banks have employed 2,800 people to review cases and have coallated and reviewed in excess of five million documents. 

Over the next few months the banks will start sending out final reminders to customers to encourage as many as possible to participate before the review is closed for new entrants.

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By SAM7
09th May 2014 12:24

rate swap

How far back does this go? In 2002 we swapped from a HSBC variable commercial loan to a fixed rate and paid a lump sum for doing so, which was based on libor rate.

Would that qualify, thanks for any advice.

 

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