The payouts made by the four largest UK banks as compensation for mis-sold interest swap deals has already reached £20 million. According to figures released by the Financial Conduct Authority (FCA), an estimated £3 billion has been earmarked for compensation. In August 2013, £500,000 was paid in compensation, and £2 million was paid out in September. In October 2013, banks paid out £15.3 million in compensation.
The compensation process has recently been criticised for its slowness in awarding rightfully owed money to affected small business owners. The FCA has written to the heads of the banks responsible for selling the interest rate swap deals in the hope that the compensation process can be accelerated.
Review of Interest Rate Swaps
A review of 173 of these interest swap sales was carried out by the FCA, who found that over 90 percent of these cases did not comply with banking rules and regulations. The deals were originally sold as a means of protecting small companies and businesses against rises in interest rates. The higher fees that they paid worked as a safeguard against paying more on their loans if interest rates went up. However, the Bank of England lowered interest rates in 2008, and they have stayed low ever since.
Because of these mis-sold deals, a large amount of businesses were faced with increased payments that they could not afford. Many small business owners were sold these interest swap deals between 2001 and 2008 faced financial devastation after they made such deals. Some small companies have reported that they faced penalties for getting out of the swap deals which they were not previously told about. These “exit fees” often cost tens of thousands of pounds. The deals were sold to the businesses without a proper explanation of how they actually worked, which has lead to the ruin of some business owners and a further crisis of faith with regards to the banking industry.
The four biggest banks in the UK – HSBC, the Royal Bank of Scotland, Lloyd’s Banking Group, and Barclays – have all been urged by the FCA to speed up their compensation process. The banks have agreed to offer redress payments to customers as well as eight percent simple interest. This is meant to compensate for the “opportunity cost” of losing money. The compensation and payout process began in May 2013.
While the number of businesses opting in to the compensation scheme is rising, there are still 4,000 customers who have not signed up for the process. Reaching these customers and encouraging them to seek compensation may take some time. In addition, operational delays on the part of the banks may lead to a slower compensation process. Still, the uptake in participants asking for redress from the banks is an encouraging sign.
News for Interest Rate SWAPs
Banks Lose Legal Battle, Swap Compensation Claims May Rise
Barclays and Deutsche Bank have recently been designated defendants in civil lawsuits filed by current lending customers. The banking institutions previously intiated an independent review of their loans that had included an additional insurance product called an interest rate swap. The interest rate swap product allowed the interest rates on the loan outstanding to move against any interest rate changes in the open derivatives markets. Any interest rates that moved negatively would be hedged with the additional interest rate swap product that was being sold to new customers
Swap Claims Compensation Too Slow, Says FCA
The Financial Conduct Authority (FCA) has stated that compensation for swap claims has been too slow, and that some businesses may suffer because of the delay. This has caused a large amount of frustration on the part of customers who were sold these interest rate swap deals and have suffered as a result.
Dealing with Consequential Loss from Interest Rate Swaps
When will the investors who were mis-sold interest rate swaps (IRS) be compensated for their losses? The High Street banks were paid in 2008, but why aren’t the regular investors being compensated? The banks have admitted guilt. So why the slow process?
The UK has changed its primary financial regulatory agency and made new rules. In November 2013, there are promises for letters dealing with consequential loss from interest rate swaps. Here are the details and what you discover when you “read between the lines.”
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.
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
Latest posts by Tim Capper (see all)
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