Lord Alan Sugar has sent a formal letter of complaint to Lloyds Bank for “mis-selling” of an Interest Rate hedging product. The apparent Break free sum amounts to £10m which was attached to the interest rate hedging product Lord Sugar used on his property.

The derivative was to protect against interest rate rises on a £97m Lloyds loan. Lord Sugar is undersatood to be considering legal action if the complaint is unsuccessful.

This case will make an interesting test case, as Lord Sugar clearly fails the “non-sophisticated” test that the FCA released to determine mis-selling of interest rate swaps.

The Financial Conduct Authority (FCA), previously the Financial Services Authority (FSA) has created a set of questions and answers to determine whether a customer who was sold an interest rate swap product qualifies as “non-sophisticated” and therefore eligible to make an interest rate swap claim.

SEE FCA TEST

Will Lloyds capitulate, this may open up other “sophisticated” customers to lodge a complaint and if this goes to court, that would also provide the first test case for mis-selling of interest rate swaps to sophisticated customers.

Lord Sugar in £10m ‘mis-selling’ complaint against Lloyds

The multi-millionaire founder of Amstrad has complained to Lloyds Banking Group over its sale of a hedging product on a loan taken out against part of his property empire.

Lloyds has received a letter of complaint from Lord Sugar, who, according to one source, is seeking the return of about £10m in break fees paid to Lloyds to cancel the interest rate hedging contract.

Lord Sugar is understood to be considering legal action should his complaint be unsuccessful. The derivative is understood to have been for £97m and was taken out to protect against a rise in interest rates on a Lloyds loan.

A spokesman for Lord Sugar declined to comment. Lloyds also declined to comment.

Lord Sugar’s complaint makes him the most high-profile business owner yet to be linked to the scandal, which saw thousands of smaller businesses across the country sold complex derivatives linked to interest rates. The products ended up costing them hundreds of thousands and even millions pounds in costs many say they were never warned about.

Lloyds, along with all of the UK’s other major lenders, including Barclays, HSBC and Royal Bank of Scotland, signed up in June 2012 to a redress scheme for victims.

Barclays has made by far the largest provision against swaps mis-selling, putting aside £1.5bn to compensate customers, while RBS has made a provision of £750m. Lloyds’ provision currently stands at £400m, slightly more than the $598m (£385m) put aside by HSBC.

However, more than a year on from setting up the compensation process, no money has been paid out. The campaign for compensation has received the support of more than 50 MPs who have lobbied the Financial Services Authority and its successor body, the Financial Conduct Authority, to speed up the process.

The scheme itself has been criticised by victims groups, such as Bully Banks, and several experts have also pointed out potential problems with the redress process.

A judicial review of a controversial clause capping claims of more than £10m is currently under way.

Banks are also facing criticism over their handling of the related loss claims linked to mis-sold hedges. Many of those who have received compensation offers have been told their redress is subject to them reaching a settlement on their so-called “consequential loss” claims.

Lord Sugar is not eligible to join the FCA scheme.

Original article : www.telegraph.co.uk


Interest Rate Swaps: Information

FCA yes/no question and answer for IRSA

Derivatives may be one of the most complicated financial investments on the market. The Financial Conduct Authority (FCA) has created a chart to help consumers, barristers and bureaucrats understand whether a potentially mis-sold Interest Rate swap Hedging Product (IRHP) can be reviewed. The Financial Conduct Authority (FCA) Interest Rate Flow Chart uses a flow diagram with “Yes/No” questions to show whether a debtor qualifies for regulatory review.

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FCA Involved in RBS Interest Rate Swap Mis-selling Case

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Interest Rate Swap Review

The investigation of this matter began after the FSA had determined that there were “some serious failings” with the way banks had sold IRHPs to businesses, the FSA said in its statement. The information gleaned from the initial investigation led to the FSA to call for a review.

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Interest Rate SWAP Claims

Maple Leaf Financial have a specialist team of solicitors dedicated to dealing with the mis-selling of interest rate swap protection products by the banks. We are happy to review these relatively complex swap arrangements and to claim compensation for our clients where appropriate.

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Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim

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Tim Capper

Bringing you financial news and information in plain english for Maple Leaf Financial. My aim is to help readers understand these often complex financial instruments.