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In 2012, we identified failings in the way that some banks sold IRHPs. The banks involved agreed to review their sales of IRHPs made to unsophisticated customers since 2001. The full review started in May 2013.
The voluntary agreements establishing the IRHP scheme are supported by independent reviewers appointed under s.166 of the Financial Services and Markets Act 2000. Every case is overseen and verified by an independent reviewer.
Customer engagement in the review has been high with 86% of eligible customers choosing to have their cases reviewed. We would like to encourage the 600 customers yet to decide to do so as quickly as possible.
The review so far
All nine banks have now completed their sales reviews of customers who joined the review before March 2014. AIB, Bank of Ireland, Co-op, HSBC, Lloyds, Santander, and Clydesdale and Yorkshire Banks have met our target by delivering redress letters to all but a handful of these customers by the end of May, within 12 months of starting their reviews. Barclays and RBS will send out redress letters to the remaining customers (around 500 customers between them relating to 700 sales) before the end of June.
The banks have now sent 15,000 redress determinations to customers, 13,000 of which include a cash redress offer and 2,000 confirm that the IRHP sale complied with our rules or that the customer suffered no loss.
To date, 7,000 customers have accepted a redress offer and £1.1 billion is being paid out. In addition to the £1.1 billion of redress payable to customers, the banks have set aside money to cover the costs of having to get out of these products (the payments customers would have made in the future), the costs of employing more than 3,000 people to carry out the exercise, and the costs of engaging independent reviewers to look at every case.
The latest figures
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 view
Progress by bank – projection vs actual
Progress of consequential loss claims
Next steps
Since March 2014, around 800 customers have chosen to join the review and these cases will be dealt with over the next few months.
For those customers who have received an offer, the banks will also continue to hold meetings, during which they can obtain a more detailed explanation of the decision, ask questions and, if appropriate, provide additional information. The banks and independent reviewers will carefully consider any points that are raised by customers.
Finally, the banks and independent reviewers will continue to assess customers’ claims for consequential losses. Every redress offer has 8% simple interest per year added which is intended to compensate customers for the lost opportunity cost of being deprived of their money (e.g. lost interest or profits). For many customers who were sold an IRHP more than 5 years ago, the cumulative interest payments will amount to more than 40% of their basic redress payment. Customers who can demonstrate that the losses caused by their IRHP exceeded 8% per year can submit a consequential loss claim.
We expect the work of the banks and independent reviewers to continue until the end of the year. We will continue to provide close oversight of the IRHP review and will provide quarterly updates, including information about the progress of consequential loss claims.
For further information, visit the FCA webpage on IRHP.
