LEXLAW Solicitors & Barristers
The High Court permitted a judicial review of the FCA’s Interest Rate Hedging Product (IRHP) swaps mis-selling review scheme. The case challenges the fairness and adequacy of the FCA’s redress process, arguing it fails to provide proper compensation and independent oversight. This decision marks a significant step for affected SMEs seeking accountability and more effective remedies for mis-sold swaps under the FCA scheme.
The Treasury Committee report criticises conduct in SME lending, focusing on four key areas: FCA’s IRHP mis-selling review, Tailored Business Loans (TBLs), hidden swaps embedded in loans, and RBS’s Global Restructuring Group (GRG). The report finds systemic failings, lack of transparency, and inadequate customer protections. It calls for stronger regulatory oversight, better redress schemes, and reforms to prevent banks exploiting SMEs through complex financial products and aggressive recovery tactics.
The FCA’s confidential agreement with major banks set up the Interest Rate Hedging Product (IRHP) Review to address mis-selling claims. The Treasury Select Committee criticized the scheme for potentially allowing banks to avoid meaningful redress for SMEs, favouring banks over customers. The agreement details the redress process, but concerns remain about fairness and effectiveness. The Committee continues to scrutinize the review and its impact on SME lending.
A KPMG whistleblower revealed that RBS pressured the FCA Interest Rate Hedging Product (IRHP) redress scheme to reduce compensation payouts, often challenging claims over £750,000. RBS preferred offering alternative products rather than cash refunds and frequently argued sales were compliant to avoid redress. The FCA’s review was criticised for lacking independence, allowing banks to self-assess wrongdoing, causing unfair delays and rejections of consequential loss claims. Many SMEs have been short-changed due to these flaws, highlighting the need for urgent legal advice and challenge of unfair redress offers.
HMRC has issued tax advice leaflets for banks to hand to customers receiving redress from mis-sold Interest Rate Hedging Products (IRHP), urging correct tax return reporting. Affected banks must review sales since 2001 under FCA supervision, leading to customer compensation. Redress payments, consisting of basic redress, 8% compensatory interest, and consequential losses, are generally taxable income or subject to capital gains tax. Individuals should account for tax deducted from interest. HMRC recommends consulting an accountant for complex scenarios.
RBS Clifford Chance report on swaps mis-selling is a “whitewash” attempt to downplay the bank’s wrongdoing and avoid accountability. The report is lacks independence and fails to address the full scale of RBS mis-selling. It has fueled calls for stronger action into bank misconduct.
The Financial Conduct Authority (FCA) announced a review into allegations against RBS’s Global Restructuring Group (GRG), following claims of unfair treatment of businesses during the credit crisis. The review focuses on whether GRG used aggressive tactics that led to unnecessary fees, the stripping of assets, and forced bankruptcies. This follows whistleblower revelations and reports highlighting GRG’s controversial practices.
The Tomlinson Report accuses RBS and Lloyds of unscrupulous practices through their turnaround divisions. It found the banks deliberately distressed viable businesses, charging excessive fees to force insolvency and acquire assets cheaply via property divisions like RBS West Register. The report describes these actions as systematic and institutional, damaging SMEs.
BBC Panorama featured LEXLAW as we helped expose a major bank swap scandal, with widespread mis-selling of complex derivatives to SMEs. Despite a Financial Conduct Authority (FCA) redress scheme reviewing nearly 30,000 cases, only 32 businesses had received payouts at the time of the report.
The Court of Appeal in Green & Rowley v RBS confirmed that a bank does not owe a common law duty to ensure that customers fully understand the risks of interest rate swaps beyond the regulatory requirements. The case involved claims of mis-selling, particularly around inadequate disclosures. The court upheld that the bank’s compliance with the Financial Services Authority’s Conduct of Business Rules was sufficient, and the customers were considered knowledgeable enough to understand the transaction.