In the September issue of the Financial Ombudsman’s newsletter, Ombudsman News, the Ombudsman updates us on its decisions in several cases where banks allegedly mis-sold interest rate hedging products including swaps, caps, collars and structured collars.
The case studies make interesting reading. Since the FSA (now the FCA) announced in September 2012 that it had found serious failings in the sale of interest rate hedging products, there has been a small increase in the number of complaints received by the Ombudsman about these products.
The consumer complaints that have been raised with the Ombudsman seem to focus on claims that the customer was mis-sold the product and particularly did not understand the product and the potential costs of early termination. The Ombudsman advises that, in investigating a mis-selling claim, it will consider what the business would have likely done if it had been given suitable advice and/or the necessary information. If it appears that, had the business been given appropriate advice and/or information, it would not have taken out the interest rate hedging product, the Ombudsman is likely to order that the bank put the business back in the position it would be in if it hadn’t taken out the product.
Alongside the Ombudsman’s investigations, the banks have agreed with the FCA to engage in a voluntary process of reviewing the sales made since 2001. This voluntary review process is currently underway at all the key banks, including Barclays, RBS, NatWest, AIB and BOI. If a satisfactory result cannot be achieved through either the Ombudsman’s investigations or the bank’s own investigations, it may also be possible to issue a mis-selling claim in the courts.
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