The Banks’ Approach to Handling IRHP Complaints
Time is running out for businesses to bring a complaint against their bank if they were sold an Interest Rate Hedging Product (IRHP), particularly if you take at face value the content of recent communications that are being received by some unfortunate commercial customers.
Many businesses have had the unfortunate experience of purchasing various forms of IRHP from their commercial bankers as part of loan and financing arrangements that were entered into several years ago. These IRHPs came in a variety of guises and were often described as caps, collars, structured collars and IRHP arrangements and were not suitable or appropriate for the businesses who purchased them.
This issue has garnered a high degree of press attention. The FCA required the firms responsible for promoting and selling these products to conduct out a redress scheme to try to mitigate the losses suffered by businesses who have experienced avoidable detriment. These losses include both the direct costs that may have been incurred in taking out the product and/or consequential losses in appropriate cases.
Whilst some commercial customers have benefitted from this scheme and have already received redress, many other customers have experienced difficulty in obtaining a remedy.
Gavin Foggo, the Head of the FW Dispute Resolution team has observed:
“We have seen instances of IRHP being purchased by all types of business ranging from care homes, agricultural and farming enterprises, property developers and many others. These products were a highly lucrative product for the banks to sell to their commercial customers as part of their lending arrangements, although they were not suitable for many customers.
Whilst many of our clients are experienced business people they were reliant on their banks to ensure that the products they were sold were appropriate. It is clear that these customers have been let down and now have claims they should be pursuing through the FCA redress system or the High Court if necessary.”
The FW Dispute Resolution team are aware of commercial customers who have sought to claim redress through the FCA scheme and are having their claims rejected and/or their cases being closed without justification. It appears that this could be as a result of the banks seeking to mitigate their liabilities and bring the redress process to an end.
Peter Wright, the Head of FW’s Financial Services Regulatory team (and formerly with the Enforcement and Financial Crime Division of the Financial Services Authority) has commented:
“There appears to be a growing indication that the banks are not treating their commercial customers fairly in the FCA redress process. If a bank participating in the redress scheme has not acted in accordance with its regulatory obligations then it can be challenged.
Our team is concerned that businesses are being forced to accept settlements that do not reflect the detriment they have suffered. It is therefore vital for businesses to act swiftly in these circumstances to avoid further loss.”
This apparent practice of closing well founded claims for redress shows that commercial customers are still experiencing detriment and some of them are not being treated appropriately. Commercial customers who have not had the benefit of legal advice are particularly at risk of suffering a poor outcome or not receiving the redress that they are properly entitled to. This has been exacerbated by the fact that both the FCA and the banks have not encouraged customers to take their own legal advice – this can be a potentially costly decision if an inappropriate redress offer is accepted and will leave little scope for any further future challenge.
As the banks are now seeking to wind down their redress schemes it is vital that commercial customers act quickly to protect their position if they have not already done so.
The FW Dispute Resolution team and our external banking and investment experts can offer specialist legal, regulatory and banking sector expertise to provide a seamless service to firms facing these issues.
We can provide an innovative funding and support solution to ensure that any firm affected by these issues can access a tailored specialist City Law firm solution at a cost that is fixed, accessible and minimises your business risk.
This solution may not be suitable for all businesses but we are happy to discuss this on a no obligation basis.
If this is an issue that affects you and your business then get in touch with our expert team without obligation.
Please email our team at IRHP@foxwilliams.com or call us on +44 (0)20 7614 2678.
Once you get in contact a specialist member of our team will be in contact as soon as possible to discuss the options available to your business.
For more information on IRHP you can visit the FCA website.