There are fresh calls for the FCA to re-examine how the banks have handled the review of mis-sold hedging products. This comes on the back of the latest compensation figures released by the FCA and legal views on how inequitable the process has been, in particular for claimants of compensation for ‘consequential loss’.
To recap, the reviews have usually led to the repayment by the bank of the premiums already paid over time by businesses where the conclusion has been that the product was not suitable or there was a breach of process. Because the banks accept that if the business had benefited from those funds at the time then they would have employed them to good effect, they have automatically then added an offer of ‘consequential loss’ at a level of 8% (with the agreement of the FCA). Businesses are then invited to make a claim for more, but with the risk that if the case doesn’t stand up the 8% could potentially be at risk.
There are, by law, clear guidelines for claiming consequential loss and many businesses have either been ignorant of, or ignored these and attempted to claim for losses which would never meet the criteria – sadly often encouraged by ‘Claims Advisers’ or accountants, who should know better. However many genuine, well presented and evidenced claims have been rejected, leading to only 56 claimants having been paid consequential loss compensation over £100,000. To put that in context, the FCA ordered a review of 30,000 sales of which more than 90% (so about 27,000) were found to be ‘in breach’ and the review has (so far) led to compensation of £2.1 billion. Of that £507m has been paid out in consequential loss, when if the 8% had applied, about £130m would have been paid out automatically. So it all points to a low success rate on these claims.
One of the leading lawyers acting in these cases has claimed that the process was fundamentally flawed, given issues such as the absence of a route of appeal, lack of disclosure of the banks documents, requests for evidence beyond that required under legal principles and inconsistency across the banks figures on this (RBS have paid out in less cases for example).
It would however seem unlikely that the FCA will re-review this process (although they did do this in the case of Lloyds PPI claims record). That would only probably happen if there were a high level of complaints to the FCA, but many businesses have already put so much effort into the claims that they tend to give up if their claims are rejected with no apparent right of appeal. Such complaints would of course have to be robust if they are not just going to be rejected out of hand and it is also doubtful that a business could present such a claim without professional help.
As a tip, businesses considering complaining to the FCA should consider:
- Ensuring that they are aware of the legal requirements for consequential loss claims. In particular the need for evidence to support the loss (many of the claims have apparently been lacking in supporting evidence).
- Finding ‘a new angle’ – such as facts that they believe that the bank have not properly considered.
- Focussing on shortcomings in how their individual case has been handled (rather than the original sale and its implications)
