Regulation  

Hedging product victims get £1.8bn redress so far

Hedging product victims get £1.8bn redress so far

The Financial Conduct Authority has revealed that 11,000 consumers have received redress payments of £1.8bn, including more than £365m to cover consequential losses, from banks in the interest rate hedging product review scheme.

The final date for new entrants to join the scheme will be 31 March and the FCA has asked banks to remind eligible customers of their right to complain, urging customers to do so as soon as possible.

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 the regulator’s rules, or that the customer suffered no loss.

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So far, 80 per cent of offers have been accepted. For those banks who got their letters out earlier, the acceptance rates are around 90 per cent.

In 2012, the Financial Services Authority identified failings in the way that some banks sold interest rate hedging products - 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 the regulator’s rules as either ‘private customers’ - for 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 and Yorkshire Banks, Co-operative Bank, Lloyds Banking Group, Royal Bank of Scotland and Santander UK.

They all sought to identify 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.

peter.walker@ft.com