The mis-selling of IRHP – interest rate hedging products

The space for advice in the mis-selling of Interest Rate Hedging Products (IRHP’s) is becoming increasingly busy. A quick Google search of ‘IRHP’ is enough to start your head spinning.

Also known as IRSA’s, (Interest Rate Swap Agreements) these were financial products sold by banks to provide protection to businesses from interest rate increases.

Bully-Banks was created to co-ordinate complaints by the owners of small and medium sized business against the conduct of Banks when mis-selling Interest Rate Swap Agreements (“IRSAs”).

The reality is that case law is yet to set a precedent for a mis-sold IRHP and every case is different. It is reported that many cases started on don’t actually reach court; they are simply settled with a gagging order on the court steps. Bad PR is a thing to avoid for banks.

In a world that seems like every law firm and compensation claims specialist is offering their service to litigate, is a Lawyer needed ? After all you have to commence litigation within a 6 year time or you could lose the rights to sue. Surely you should act now ?

The FSA have a Review process to establish Redress and state ‘Customers do not need to use a claims management company because the process is straightforward’

Ok I thought, brilliant, straightforward…….then I heard from people who had undertaken their ‘straightforward’ fact find interview, or should I say grilling, by the FSA approved, Bank appointed, Independent Reviewers – a multi-national law firm from the City with over 1,000 lawyers !

Is it David v Goliath ?

Bank Appointed and Independent in the same sentence sent a shudder down my spine. How does this work ? Maybe we need to get an Independent Reviewer or Lawyer as well. After all, as I read further into the FSA document, they detail in the Customer communications section that a robust process is in place for engaging with customers during the review. Robust or Interview undertaken with prejudice ?

So what is the FSA Review?

The FSA review is a voluntary review scheme and should be congratulated as an alternative or to run alongside any Litigation.

It has been implemented on the back of their pilot findings, announced at the end of January 2013, working with the banks, the Federation of Small Businesses (FSB) and Bully Banks. The Review scheme aims to run a review process and implement their Principals of redress;

All ‘non-compliant’ sales will be considered for redress. Redress must be fair and reasonable in each case. Redress should aim to put customers back in the position they would have been in had the breach of regulatory requirements not occurred’

This is a very bold statement and one which every IRHP mis-sold victim has as a sub conscious mantra

‘back in the position they would have been………………back in a position they would have been……….’

But how can the FSA Principal of redress be achieved ?

Surely it is impossible to turn back the clock ? What about missed opportunities through cash flow issues on premium payments to these ‘toxic’ products ? What about putting back jobs that have been lost – what are the social and economics of that ?

Think of companies who as a result of being mis-sold are now in Administration or worse Liquidation or even worse now ‘struck off’, how is redress calculated and affected for them ?

Stress, sleepless nights, time, advice costs, worry, confidence, reputation, the list is endless and each case different. The FSA approved, bank appointed Independent Reviewers have a task and a half

The Redress scheme can only achieve so much. If it achieves the fact that a miss sale has been committed without sufficient ‘compensation’ does this open the floodgates for consequential losses and cause and effect under Tort ?

40,000 cases of litigation ?

Is this the second phase of this never ending story of IRHP mis-sales ?

So many unanswered questions and if the scheme does not compensate in full it could create a second wave of ‘claims’ – the Lawyers and Claims Specialists are all waiting in the wings; files at the ready ………The FSA has an impossible task but all IRHP Victims hold hope in a suitable outcome

It is a crazy world when you are victim of a banks wrong doing. It is more than David v Goliath. To litigate will possibly cost every party more than the compensation due.

My message to the FSA is that now is the time for them to illustrate their role and implement a system of review to provide confidence to SME’s all over the country. Banks are in need of some good PR, get this wrong and you are possibly affecting up to 40,000 SME’s; that is 40,000 people who have the ability to run a small business; entrepreneurs, focused, motivated – not a group of people you want upset !

It has been a great process of review so far, the most important and biggest hurdle is yet to come

40,000 potential cases of Litigation against the Banks is the last thing the UK Economy needs.

This Guest Article was kindly provided Jon Welsby, a victim of mis-selling of Interest rate Hedging Products and an active member of Bully Banks – to contact John please email welsbys@gmail.com

Share This Article