Are the banks being allowed to delay the outcomes in the FCA irhp review for insolvent companies and if so why ?

In 2012 the FCA announced that it would be reviewing the banks selling of interest rate hedging products (irhp) to small businesses in the UK and detailed as much by way of commencement of the scheme in May 2013.

The British Bankers Association followed up with their own announcement congratulating the FCA by stating ;

‘We welcome the transparency provided today on how consequential loss claims should be dealt with which will allow redress payments to be progressed‘

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 But why are so many UK businesses still waiting for the banks to complete their reviews ?

The FCA state on their website ;

Banks project to have completed all redress determinations by the end of May 2014, 12 months after the start of case reviews. We publish monthly updates on the progress of the review, including graphs that allow customers to track banks’ progress against their projections. Consequential loss claims may take longer to review‘

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The FCA then go on to state that ;

 ‘Banks aim to assess most claims in around 4-8 weeks. Some more complex claims could take longer. All claims are being assessed by independent reviewers. If claims are rejected, banks are providing constructive feedback so that, where appropriate customers may be able to provide additional information to support their claims ‘

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Banks being allowed to ‘split’ redress – why ?

In the middle of the review the banks were lobbied by Stakeholders and agreed to split the redress payments due into two parts;

Basic Redress ; a refund of basic irhp premiums paid

Consequential Loss ; payment of the losses should they meet normal ‘legal tests’

Allowing the banks to split the redress was a disaster for many reasons, including ;

  • The banks were allowed to create basic offers in difficult to understand legal language
  • Each bank differs
  • Each bank attached legal releases to the basic offers and in Lloyds bank case this included fraud.
  • The banks were allowed to detail only the first part of redress, the basic redress, without taking into consideration any known loss submissions that may have been detailed earlier in the review process

In short it was either a stroke of genius by the banks or a moment of ineptness by the Stakeholders

The BBA had already announced its Moratorium on irhp payments where the customer was in distress so where was the need to split payment.

The bank had a job to do in its review, it just needed to do it

‘ As the FCA reports today the industry has suspended payments for businesses in financial distress pending completion of the review. If any other business is facing financial distress and wants a suspension of payments they should get in touch with their bank immediately ‘

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Loss Submissions in the FCA review

We are working with some insolvent claims that have been waiting over 6 months to have basic Loss Submissions made in the FCA review replied to by the bank.

The claims we have submitted are only where the evidence allows us to state that ‘but for the irhp missale the business would have avoided the insolvency process’ and in some cases this is endorsed by the Insolvency Practitioner, often bank appointed.

How would it work if the Boot was on the other foot ?


I find it hard to imagine a situation where in a case where the Director of a business had admitted it had taken monies from a company ‘incorrectly’, lets say circa £0.5m and that they would assess the impact of this cash taken as long as they were allowed any length of time to assess themselves first.

As we stand in September 2015 we are some three years since the banks invited businesses in to help them assess and engage Independent Reviewers. The FCA review population is circa 20,000 with just 2000 insolvent cases, so why the delay ?

In contrast I congratulate one main street bank who has replied. They have written back and admitted that ‘but for the irhp contract the business would have avoided insolvency’. Good for them. Let’s see if they can now recognise the implicit and explicit effects that require them to implement the Principal of the Review;

Fair and reasonable redress means putting the customer back in the position they would have been in had the regulatory failings not occurred, including any consequential loss. 

The banks have agreed to consider consequential loss on the basis of established legal principles in relation to claims in tort and for breach of statutory duty

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My conclusion is that I believe the banks know that irhp’s have destroyed some businesses and that the losses due are considerable. 

Time will tell.

As we await responses to our submission we still have confidence that the FCA review scheme will deliver but in case it does not, we are fully prepared with funding & ATE packages to allow credible claims to take on Litigation and deliver on the schemes failures

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