Berg has been working in the area of IRHPs for a number of years, well before the June 2012 announcement by the FSA about the review process. In that time we have been leaders of the field and have succeeded in attaining very good outcomes for our clients.
One of the areas that has caused a lot of consternation for clients has been fixed rate loans, whether those imposed by Lloyds and Bank of Scotland or the tailored business loan, fixed rate, imposed by Clydesdale/Yorkshire Bank/NAB.
We have succeeded, in the FCA Led Review, to secure redress for every client that we represented prior to and during the fact find process. Whilst a few have had Caps imposed with the net cash flows refunded after the payment of the premium, we have not had
any other form of “alternative hedge” imposed. None of our clients who were represented by us prior to and during the fact find stage has had their claims rejected. We see this as a very good victory for our clients and a testament to the knowledge, experience
and dedication of the solicitors, trainees and paralegals on our banking litigation team. We now look forward to speaking to new clients who have not done as well in the review and wish to consider their options.
We have also been contacted by quite a number of clients who were forced into fixed rate loans that transpired to have an embedded IRHP in it. In each case the client believed they were getting a “normal” fixed rate loan, but were horrified to find that the
penalty for early withdrawal from the loan created economically damaging break fees. Clydesdale/Yorkshire Bank has always sold these products as Tailored Business Loans, and Bank of Scotland, HBOS and Lloyds have variously sold those 2007 to 2012.
One such client, who is a Scottish property development partnership comprising a husband and wife team, entered into one such fixed rate loan with Bank of Scotland in 2008. The clients did not have a problem, per se, with the fixed rate loan, but did have
a problem with the £90,000 break fee they had not expected. Berg negotiated with the Bank of Scotland/Lloyds that the break fee would be placed into an interest free overdraft facility to be repaid following a determination by the Financial Ombudsman Service
on the partnership’s complaint.
We are pleased to announce that the Financial Ombudsman Service has now determined that the fixed rate loan for our client, a partnership, was unfair and that the bank had failed to be clear about the dangers of entering into this specific type of fixed rate
loan, which we refer to an embedded swap fixed rate loan As a consequence, FOS has directed the Bank to cancel the fixed rate loan and reconstruct the accounts as if the partnership had only entered into a variable rate loan (as they have always done previously)
and to a) repay the over-draft with no cost to the partnership and b) refund all charges and c) deal with any tax implications. FOS has decided that the partnership, had they been given clear, fair and not misleading information would never have agreed to
a fixed rate loan and as such should change it to a variable rate loan.
This is the first of many decisions that Berg anticipates from FOS regarding the 2008 to 2012 fixed rate loans that were pushed by the Lloyds Group of banks and the fixed rate TBLs from Clydesdale/YB. We are just very unhappy that the FCA continues to pander
to the Banks and refuses to carry out a review of fixed rate loans that have embedded swaps, especially as there are anything up to 80,000 of them, which dwarfs the swaps scandal.
If you have a fixed rate loan and would like to discuss the options available in respect of it, please contact a member of the Banking & Financial Litigation Team.
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