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Clive Adamson, director of supervision at the FCA said:
“Banks have picked up the pace since November; we asked that they focus their efforts on making far more rapid progress in assessing individual cases and crucially in providing redress. May remains the target for all offers to have been sent out and the banks involved are working towards that. Any affected business that has been invited to join the scheme and hasn’t, needs to act now so they can receive the redress they’re due.”
In 2012, we identified failings in the way that some banks sold IRHPs. The banks involved agreed to review their sales of IRHPs1 made to certain customers2 since 2001.
The banks carried out a pilot exercise to test the review process. We reported key findings of the pilot in January 2013. The banks agreed to conduct their reviews using the approach set out in the report.
The banks and the independent reviewers needed to take the time to ensure that their methods were in line with the agreed approach. This included building robust redress models, recruiting and training staff, and writing clear communications for customers. The full review started in May 2013.
The review so far
Click below to see the number of sales at each stage of the review. In response to feedback from customers, we have included granular information about sophisticated customers, customers who have not opted in to the review, and about the types of alternative products that some customers are being offered as redress.
| Number of sales at each stage - overall view | Number of sales at each stage – bank-by-bank |
This table summarises the banks’ progress and the position at the end of December:
|
|
Aug |
Sept |
Oct |
Nov |
Dec |
|---|---|---|---|---|---|
| Joining the review |
|
|
|
||
| Sophistication assessments completed |
80% |
90% |
94% |
98% |
99% |
| Customers invited to join review |
15,000 |
16,000 |
17,500 |
18,400 |
18,700 |
| Overall customer opt-in rate |
50% |
65% |
70% |
76% |
78% |
| Compliance |
|
|
|
||
| Compliance assessments complete (% of customers who have opted in) |
8% |
12% |
25% |
34% |
48% |
| Overall rate of non-compliant sales |
93% |
95% |
95% |
95% |
96% |
| Redress |
|
|
|
|
|
| Customers in redress phase |
1,950 |
2,600 |
4,100 |
6,100 |
7,500 |
| Redress determinations complete (including compliant and non-compliant sales where no redress is due) |
500 |
950 |
1,850 |
3,300 |
5,200 |
| Redress determination letters sent (including compliant and non-compliant sales where no redress is due) |
250 |
500 |
1,300 |
2,600 |
4,600 |
| Outcomes |
|
|
|
|
|
| Offers accepted (‘full tear up’ and alternative product offers) |
10 |
32 |
125 |
547 |
1040 |
| Redress paid |
£0.5m |
£2.0m |
£15.3m |
£81.2m |
£158.6m |
| Outcomes where no redress is due |
78 |
112 |
253 |
438 |
672 |
The latest figures show the pace of the banks’ reviews is continuing to increase.
The banks’ projections for completion of their reviews can be seen below. These show that they remain on track to provide a redress determination to all customers within 12 months of starting their reviews.
Bank projections for completing reviews
However, the banks’ ability to deliver against their projections will also require timely engagement from customers. We would like to encourage the 3,700 customers yet to opt-in to the review to do so as quickly as possible.
Over the next few months the banks will start sending out final reminders to customers to encourage as many as possible to participate, before the review is closed for new entrants.
Redress for consumers
The IRHP review has been set up to deliver fair and reasonable redress to customers where appropriate without the necessity to hire lawyers or claims management companies (although some customers may want to consider seeking legal advice if they are considering a separate legal action).
The only action customers need to take to have their case assessed is to opt-in to the review and then share any relevant evidence or testimony that they have on how the sale was conducted.
The banks have agreed to offer customers 8% simple interest on top of redress payments and which is intended to compensate customers for the opportunity cost of being deprived of their money (e.g. lost interest or profits). For many customers, taking into account the economic environment over the last five years, this will represent a straightforward and fair alternative to putting together consequential loss claims which are likely to take longer to assess. Independent reviewers will oversee the review process from start to finish, ensuring that the outcomes provided to customers are fair and reasonable.
How cases are assessed
It is vital to the success of the review process that significant time and resource goes into reviewing each sale. Every case is different and the specific facts and customer circumstances must be understood and carefully considered in arriving at a redress offer that is fair and reasonable.
The banks and independent reviewers have employed 2,800 people to review cases, and have so far collated and reviewed in excess of 5m documents.
Find out more about:
- How the review process works
- Fair and reasonable redress and what can likely be claimed as a consequential loss
- Illustrative examples of fair and reasonable redress offers
- Businesses in financial difficulty, businesses in administration and dissolved companies
1For these purposes, we mean IRHPs that are derivatives which are separate to a lending arrangement and are for the purpose of managing interest rate fluctuations.
2That is, customers classified under our rules as either ‘private customers’ (in relation to sales made on or before 31 October 2007) or ‘retail clients’ (for sales made on or after 1 November 2007), and assessed as being eligible for the review under the ‘sophistication test’.
