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Bully Banks members angry over swaps redress

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18th Jul 2013
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Businesses mis-sold interest rate hedging products are dissatisfied with the time banks are taking to issue redress under the FCA scheme, according to Bully Banks.

The interest group was set up by a group of business owners mis-sold hedging products to bring other similar businesses together against banks’ conduct.

It recently held a conference in Birmingham, where 600 members - including the head of the All-Party Parliamentary Group on Interest Rate Swap Mis-Selling Guto Bebb MP - attended to discuss legal updates, compare experiences of the redress process and share ideas.

Claims specialists All Square Treasury also attended and outlined some of the key points of concern from the affected businesses at the conference. 

Chairmen Jeremy Roe also spoke to AccountingWEB and gave his thoughts and insight on what he thought the main issues were.

Consequential loss

Consequential losses (CL) are, for example, bank charges, interest charges, professional fees and a loss of business opportunities.

Some banks, such as Barclays, appear to be trying to calculate consequential loss, while others aren’t considering it in their potential offers of redress.

The delay in trying to figure out what this is, is hindering businesses in regards to claims and Roe believes it may be being used by banks as a “delay tactic”.

“It’s supposed to be a single redress scheme, but it’s not. Banks are operating at different paces and doing different things,” Roe said.

“Determining consequential loss is one thing holding the whole process up. While I understand it’s a long legal procedure, banks should at least be all looking at the same thing.”

Daniel Hall from All Square advised that the key was to realise that if a client’s claim includes an element of CL, then the bank won’t release any payment for the mis-selling of the product without including the amount of CL.

It will also delay any payments as CL is complicated and needs to be evidenced and established.

Clients may feel they have to take the first offer from the bank, as their resources run out due to the time it takes in establishing this.

Slowness of the scheme

Roe said he was very dissatisfied by the speed of the scheme, as while some banks have offered payments of redress under the FCA scheme, none have actually been paid.

In June 2012, RBS, Barclays, Lloyds - who recently breached FSA scheme mis-selling guidance - and HSBC agreed to pay compensation to 40,000 affected small-to-medium-sized businesses.

A full review by what is now the FCA (formerly the FSA) started in January, including six more banks but excluding sophisticated businesses, or firms large enough to know the risks of the swap. It wasn't however until March 2013 until the full scale of the swaps scandal came into focus.

Some of the smaller banks that were added to the scheme in January have yet to put a scheme in place.

Bully Banks seems to be happiest with the speedy progress Barclays is making, followed by HSBC. Lloyds and RBS are the two slowest to deal with claims, however.  

Opt in clause

This is important for accountants, Hall said, as banks are now writing to their customers inviting them to a review of their interest rate hedging product.

Accountants should be aware that this is an opt in scheme, and if your client does not opt in then their product will not be reviewed and redress will not be issued.  

Redress scheme confidence

There was a ‘yes’ and a ‘no’ camp when it came to the FSA review scheme at the conference, Hall said.

Those who say the scheme can work said the upsides include there being a framework in place which is developing and can be relied upon for the future and the scheme being, while slow, operational.

However, Roe said he is concerned about the scheme on a number of levels.

“There is a major concern with the time being taken and a concern about the fact banks can decide what is and what isn’t mis-sold and what the consequential loss is themselves, with no appeal.”

Hall added that further concerns about the scheme included whether it was going to work at all, giving that things are so delayed, and there will perhaps be questions about whether compensation, once received by clients, is actually fair redress and whether the scheme is independent.

On the upside, Roe noted, HMRC has been very good to businesses affected by interest rate swap mis-selling, but pondered as to how long their kindness would last, given delays with redress. 

The key message Hall took away from the conference was that while businesses may be dissatisfied or struggling financially because of the delay in redress - hang in, there is a group here to support them and progress is being made.

All Square Treasury has produced a guide on how to identify a mis-sold interest rate swap.

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By JC
19th Jul 2013 07:15

Surely it is very simple ....

If you go to a bank and ask to borrow money (normal loan) then they start the meter running with interest and charges.

On the other hand if you 'accidently' go into an overdraft situation then the charges are penal

Therefore in these circumstances, if the banks have been found in the wrong over swaps, then the meter should be running on the same basis as they would charge a customer (either loan or unauthorised overdraft).

In fact to take it one step further in this case it could be argued that because they are in the wrong it should be likened to 'unauthorised' overdrafts and charged accordingly - using the banks own charging systems as a benchmark

Once these charging rules/guidelines were implemented no doubt the decision making would be immeasurably speeded up

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