Banking and finance
Swaps: Don’t be late
The review process agreed between the 9 major UK banks and the FCA in 2012, relating to allegations of the historic mis-selling of Interest Rate Hedging Products (‘Swaps’) is finally reaching its conclusion. Outside of this review time may be running out to bring legal claims.
Those customers who joined the review before March this year will have been notified of the banks’ proposed redress and of the nearly 16,000 determinations made under the review, 13,500 have included a cash redress offer.
To date, around 8,000 customers have accepted a redress offer and £1.2 billion is being paid out.
But what of those who are still waiting for a redress offer from their bank, or those that were determined to be ‘sophisticated’, and therefore outside of the review? There are other avenues of redress which can potentially be explored however customers need to act swiftly. Even for those who have been told by their bank to await a redress offer, by simply waiting, customers may find themselves out of time to explore other options.
Even if a customer has been selected for the review, it is not guaranteed that mis-selling will be found or that the redress proposed by the bank will be adequate or fair. Redress can range from a cancellation of the original Swap and a refund of monies paid with 8% interest, to the Swap being replaced with a ‘more appropriate’ Swap.
A legal claim outside of the review must be brought within a specified period of time. Generally speaking, in Swaps mis-selling claims, the time period in which to bring a claim will be 6 years from the date of entering into the Swap. For Swaps dated earlier than 2008 time in which to bring a claim may have already expired and for those dated 2008 or later, time is likely to be running out. Simply being in the review process will not stop time running.
Claims against the banks typically relate to: negligent advice given by the bank before the Swap was entered into; a breach of contract by the bank; a claim for a negligent misstatement made to the customer that induced them into agreeing the Swap; and the bank’s breach of its statutory duties.
The main complaints from customers to date have focused on what was, and what was not explained to them at the time of entering into the Swap; non-disclosure of the potential for and the size of exit costs (that you may have to buy yourself out of the product); and Swaps being for longer periods than the original borrowings. Some customers have found themselves, having repaid the original loan, still liable to make payments under the Swap for many years more (as it is a product separate from the loan).
Whilst the case law in claims against the banks to date may not be encouraging, and claims can be difficult to prove, that it not to say that it is impossible to succeed. It should be noted also that the cases that have gone to trial to date do not necessarily reflect the likely merits or potential success of other cases yet to reach trial; it is in the banks’ interests to settle potentially successful claims on a confidential basis before they ever see a courtroom.
Aside from a legal claim, it may also be possible to refer a case to the Financial Ombudsman to seek a determination however, it should be noted that the powers of the Ombudsman are limited in respect of the amount of compensation that can be awarded.
As mentioned at the start of this article, outside of the FCA review process time is running out to consider claims against the banks. Customers are advised therefore, if they are considering a claim against their bank, to seek legal advice without delay or they may find themselves out of time.