Financial Conduct Authority definition
Interest Rate Hedging Products (IRHP) are defined by the Financial Conduct Authority (FCA) as products which enabled ‘the customer to manage fluctuations in interest rates’.
The FCA had identified four broad categories of Interest Rate Hedging Products:
Problems caused by complex financial products
Many of these products were sold before the financial crisis in 2007, when the interest rates appeared stable.
When interest rates fell dramatically in 2008-2009 many customers were not aware that fees would become payable under their agreement. Customers were often not informed of the size of the fee required to terminate the agreement early.
Financial Conduct Authority response
A recent review of Interest Rate Hedging Products undertaken by the FCA has highlighted serious failings in the sale of these products to small and medium sized businesses (SMEs).
The FCA estimated around 40,000 customers were mis-sold products. They found that, where customers lack expertise and understanding of the product, some Interest Rate Hedging Products may be inappropriate.
These poor sales practices included:
Financial Conduct Authority redress
The FCA has reached an agreement with Barclays Bank Plc, HSBC Bank Plc, Lloyds Banking Group and The Royal Bank of Scotland Plc and National Westminster Bank Plc banks to provide appropriate redress where mis-selling has occurred, including:
We can advise you if redress through the courts may be appropriate.
It may be advisable to consider initiating the court process for misrepresentation and breach of contract.