For more than a decade, a committed group of MPs has been campaigning relentlessly on behalf of businesses that were mis-sold interest rate hedging products (IRHPs) by some of Britain’s biggest banks.
The MPs are stepping up their battle with the regulator to ensure that everyone who was mis-sold these products has the chance to gain justice. It’s a bold and principled act that restores your faith in democracy.
The All Party Parliamentary Group (APPG) on Fair Business Banking has been angered by the Financial Conduct Authority’s (FCA) decision against providing redress to thousands of businesses which MPs believe have been unfairly excluded from the existing compensation scheme. As a result, the APPG has issued a letter before action and now intends to bring a judicial review against the regulator.
In 2013, following the vast mis-selling of IRHPs across the country in the decade before, the FCA’s predecessor, the FSA, set up a compensation scheme worth £2.2 billion.
According to the MPs, more than 10,000 sales of IRHPs to around 5,000 customers were excluded from this scheme due to businesses being categorised as “sophisticated”.
The APPG said: “An independent review by John Swift QC which cost more than £7m, found that the voluntary compensation scheme set up by the FSA in response to the scandal was an ‘inadequate regulatory response’. Swift found the decision to exclude customers to be ‘ wrong’ and was made without ‘adequate objective justification’.”
The APPG previously submitted an open letter to the FCA asking the regulator to reconsider its decision to not investigate the treatment of victims excluded from the redress scheme. The FCA said it stood by its original decision.
Kevin Hollinrake MP, co-chair of the APPG, has been infuriated by the FCA’s decision to “immediately dismiss” the Swift review’s central recommendation that it was wrong to exclude 33% of all potential claims.
Mr Hollinrake added: “The regulator cannot produce any evidence to support the decision or even remember what the reasons were for excluding so many victims, meanwhile they cleared the way for banks to knock up to £10 billion off their compensation bill.”
“The FCA now knows that the eligibility criteria did not achieve its objective and now the regulator needs to step up and deliver fair and effective redress for those left out in the cold.”
Tonia Antoniazzi MP, Vice-Chair of the APPG, added: “Mis-selling scandal victims were left without remedy, livelihoods were lost, businesses built up over many years were destroyed and lives were ruined. We still have the opportunity to help those still suffering 10 years on at no fault of their own to have the life they deserve.”
An FCA spokesman confirmed that the regulator had received the APPG’s letter with regards to the judicial review.
An FCA spokesman previously told The Yorkshire Post that it was a very different organisation from that that existed when these products were sold and when the redress scheme was established.
The spokesman added: “We have accepted many of the recommendations from the independent review. We said in our response to the report in December that we don’t believe, however, that the FSA was wrong to limit the scope of the redress scheme and we consider it would not be appropriate or proportionate to take further action.”
The Swift review found that the FSA should not have treated persons within the same class differently, without well-evidenced reasons, but that was effectively what it did.
The review said: “In the event, the scheme excluded about one-third of all private customers/retail clients with IRHPs, limiting those entitled to benefit from it to ‘non-sophisticated’ customers/clients.”
The review concluded that these exclusions should have been accompanied by a full explanation. So what is the explanation? A decade later, the victims of this terrible scandal are entitled to full disclosure.