This firm has, like all other firms involved in the FCA led review into the sale of Interest Rate Hedging Products (“IRHPs”) expressed doubts about the legitimacy of the review process. These sentiments were echoed by Bully Banks. More recently the Treasury
Select Committee issued a report on 16 March 2015 into Conduct & Competition in SME Lending. That report also expressed grave doubts about the review process. This led to the then City Minister, Andrea Leadsom, writing to the Chairman of the FCA to enquire
what he was doing in regards to the TSC’s report findings.
In order to illuminate some of the issues Berg made a number of Freedom of Information Requests to the FCA in April 2015. Once of them enquired what the FCA was doing about consequential loss claims. One question posed was:
7. Since 1st June 2014 no person or company or partnership has been awarded damages for consequential losses of 100,000 or greater by any Bank taking part in the FCA led review into the historic sale of Interest Rate Hedging Products. What steps have
the FCA taken to ensure that this represents a fair and reasonable outcome for the customers.
8. Does the FCA have details of the number of consequential loss claims that have been made by bank customers that are greater than 100,000 since 1 July 2014? How many have been greater than this?
9. What steps have been taken by the FCA to investigate why so many claims exceed 100,000 but so few succeed and how the results have met the FCA’s requirement of a fair and reasonable outcome for customers within the FCA led review into the historic sale of
IRJPs by banks?’
The FCA first published data to June 2014 that showed that 11 businesses had received consequential loss claims of greater than £100,000. That figure (11) has not changed in each new published data set, suggesting that between June 2014 and 31 December 2014
no businesses were offered consequential losses greater than £100,000, though it increased to 30 when the last data was published on 14th May 2015. The FCA’s response to Berg’s question was:
“In regard to point 7, 8 and 9, we note that the assertion that no customers have been awarded consequential losses in excess of £100,000 is factually incorrect. As we show on our website, at 31 December 2014 there had been 11 cases where the amount payable
over and above the 8% a year added to every offer was between £100,000 and £1 million. The
information on our website, which can be found here relates to amount payable in respect of successful claims. We do not hold information on the value of unsuccessful claims.”
The response from the FCA was received before the new figures were put onto their website showing that between December 2014 and March 2015 a further 19 received consequential loss settlements in excess of £100,000 and, surprisingly, two have received in excess
of £1 million, which is fantastic news.
We have written to the Chairman of the FCA, John Griffiths-Jones, to explain our concerns. We received an acknowledgment but have so far received no substantive response from him.
The City Minister who has responsibility for the FCA has now changed and is Harriett Baldwin. Berg has written to Ms Baldwin to ask that she follow up her predecessor’s letter regarding the concerns that SMEs and the TSC have about the relatively minor number
of cases that are being successful on consequential loss claims.
(The information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg or any of its partners or employees. Professional legal advice
should be obtained before taking, or refraining from taking, any action as a result of this article.)