Figures published today by the Financial Conduct Authority (FCA) show 11,000 consumers have received redress payments of £1.8 billion, including more than £365 million to cover consequential losses, from banks in the Interest Rate Hedging Product (IRHP) Review Scheme.
The final date for new entrants to join the scheme will be 31 March 2015. The FCA has asked the banks to remind eligible customers of their right to complain, and urges these customers to do so as soon as possible if they want to participate in the scheme.
Latest redress figures
- So far the banks have sent 17,000 basic redress determinations to customers, 14,000 of which include a cash redress offer, and 3,000 confirm that the IRHP sale complied with our rules or that the customer suffered no loss.
- To date, around 11,000 customers have accepted a redress offer and £1.8 billion is being paid out, including more than £365 million to cover consequential losses.
- This means that, so far, 80% of offers have been accepted. For those banks who got their letters out earlier, the acceptance rates are around 90%.
More information about individual banks is available on the FCA website.
Final opportunity to join the scheme
The nine banks in the scheme sought to identify all eligible customers who were sold swaps, structured collars or simple collars and invited them to join the review. Of the 18,000 customers in this category, 16,000 chose to join the review, and 2,000 chose not to participate. All claims made in this category have now been determined and offers of basic redress made as appropriate.
A further 7,000 customers who purchased cap products were contacted by the banks and advised that these sales would only be included in the review if they proactively complained. So far only 1,000 of them have done so.
We have asked the banks to write again to all of the relevant customers to remind them of their right to complain. Any of these customers who wish to do so should contact their banks as soon as possible before 31 March 2015.
Customers will still be complain about the sale of their IRHPs to their bank after the scheme closes to new entrants on 31 March. They may also be able to refer their complaint to the Financial Ombudsman Service, or, subject to time limits, be able to pursue their complaint through the courts.
Background
- In 2012, we identified failings in the way that some banks sold IRHPs - derivatives which are separate to a lending arrangement and are for the purpose of managing interest rate fluctuations.
- The banks agreed to review their sales of these products made customers classified under our rules as either ‘private customers’ (in relation to sales made on or before 31 October 2007) or ‘retail clients’ (for sales made on or after 1 November 2007), and assessed as being eligible for the review under the ‘sophistication test’.
- The banks involved in the scheme are: Allied Irish Bank (UK), Bank of Ireland, Barclays, HSBC, Clydesdale & Yorkshire Banks, Co-operative Bank, Lloyds Banking Group, Royal Bank of Scotland and Santander UK.
- The voluntary agreements establishing the IRHP scheme are supported by independent reviewers appointed under s.166 of the Financial Services and Markets Act 2000. Every case is overseen and verified by an independent reviewer.
- Our approach to cap products was different because, compared to swaps and collars, caps posed a relatively small risk of customer detriment. Their cost was known to customers upfront, there was no risk of early exit costs, and caps allowed customers to benefit from falling interest rates. The level of complaints from customers who purchased caps has now fallen to a level (100 in the last six months) where it is appropriate for the banks to resume dealing with new complaints through their usual complaints handling processes.
- On 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- You can find more information about the FCA, as well as how it is different to the PRA, on our website.