Hundreds of the bank’s victims of interest rate swap mis-selling have been told by Barclays that if they do not accept its compensation offer they will be hit with the cost of terminating products many say they never wanted, as well as with a bill for missed premium payments.
In a letter seen by The Times, Barclays said businesses that had not yet agreed a redress deal had until October 15 to take up its offer, leading to warnings that the bank could force some of its customers into bankruptcy if they could not afford the costs. One compensation offer seen by The Times said that the Barclays customer would have to pay £118,000 in missed payments and breakage costs, despite the lender’s own review concluding that the business had been mis-sold an interest rate hedging product deemed far too complicated.
MPs have reacted with fury and Guto Bebb, head of the parliamentary campaign for swaps mis-selling victims, has written to Martin Wheatley, the outgoing head of the Financial Conduct Authority, to complain about the City watchdog’s apparent endorsement of the bank’s actions.
“I am most surprised that the FCA, as the regulator answerable to parliament, has chosen to allow the banks to choose to start to close the scheme,” Mr Bebb wrote, adding: “It is my view that the FCA as the regulator and overseer of this scheme could appear to be seen to be colluding with the banks to get as many cases signed off as possible before important legal principles are settled.”
Barclays is the first bank to notify victims of its deadline, but other large lenders, including HSBC, Lloyds Banking Group and Royal Bank of Scotland are expected to follow within months as the redress scheme is wound down.
The FCA’s predecessor, the Financial Services Authority, announced an agreement with nine banks in June 2012 to compensate SMEs mis-sold interest rate hedging products. The scheme followed complaints that tens of thousands of businesses had been pressured into buying interest rate swaps that were meant to protect them if rates rose, but that ended up costing them tens of thousands and even millions of pounds when the base rate was cut during the financial crisis.
Nearly 31,000 cases were initially reviewed, of which just over 20,000 were deemed to be eligible to take part in the scheme. By the end of June, 12,540 customers had accepted compensation totalling £1.99 billion.
About 1,600 customers have yet to accept compensation, complaining that the redress is insufficient or requires them to make statements about their need for interest rate protection they do not believe to be true. By accepting,they agree to give up all rights to take legal action against the banks.
A spokesman for Barclays said: “We are working hard to provide redress to all eligible as swiftly as possible. The date simply reflects the fact that Barclays are nearing the completion of our review, having communicated the outcomes to all eligible cases.”
A spokesman for the FCA said: “No one is forced to accept [offers] and the review we have put in place does not remove or replace customers’ right to go to the Financial Ombudsman Service, which is free, or through the courts.”