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New deadline for FCA mis-sold Swaps scheme

According to The Times (29 January 2015), the Financial Conduct Authority is set to announce a deadline of 31 March 2015 for all claims to be submitted into the redress scheme. Those businesses that do not submit a claim will potentially miss out on the opportunity to secure thousands of pounds worth of compensation from their bank if it is determined that they mis-sold the interest rate hedging product (swap).

Furthermore, the FCA is due to announce the inclusion of interest rate Caps into the review scheme. Until now, Caps could only be included in the review if the business complained to their bank in the first instance. Now Caps, which are labelled as “Category C” products in the review are to be given the same status of more complex “Category B” products, which includes swaps and collars. This means that a further 6,000 businesses could be entitled to a compensation pay out, potentially increasing the mis-selling bill within the scheme by a further £1billion. It is thought that those businesses that have yet to have the sale of their interest rate Cap product reviewed in the scheme, they will also need to opt in to the review by the 31 March 2105 deadline, otherwise, they too could miss out.

This latest move will particularly affect businesses that bank with RBS or NatWest, as it is thought that RBS sold around one third of all Caps in the market. HSBC could also face a large amount of increased pay out with Barclays and Lloyds less affected.

Why interest rate caps have been included in the review

Caps are considered to be the least complex of interest rate hedging products provided to SMEs, hence their separate categorisation as a “Category C” product. However, those businesses that have complained about the sale of their Cap are seeing almost identical mis-selling and conduct breaches as those found in the sale of Swaps and other Category B products. So far, more than 90% of interest rate hedging products has been found in the scheme to have been mis-sold and it may be the case that the mis-selling of Caps is at similarly high levels.

What to do next

This latest development potentially affects two types of businesses:

Those that have a Swap, Collar or Structured Collar and have yet to opt in to the review scheme need to do so by 31 March 2015. Those that have a Cap and have not complained to their bank so far should opt when they receive the letter from their bank inviting them into the review scheme.

If in doubt, please call the All Square team on 0113 323 1950 or email claims@allsquare.co.uk, where one of our business banking claims specialist will be able to assist.

This was posted in Bdaily's Members' News section by Daniel Hall .