Financial Mis-Selling Claims
Fixed Rate Business Loans and Hedging Claims
Some lenders, primarily Clydesdale and Yorkshire Bank, Lloyds and Bank of Scotland sold loans that included what is known as ‘embedded hedging’ which means that an interest rate hedging product was simply imported into the loan, rather than being ‘stand-alone’, as the products included in the Interest Rate Hedging Product Review (IRHP Review) were. For further information on stand-alone hedging see https://www.fca.org.uk/consumers/interest-rate-hedging-products. That review has now been concluded for all but a very small number of products. Fixed rate products were excluded from the review due to being ‘simple’ products and allegedly unregulated. The Financial Ombudsman Service has recently found in favour of several customers in relation to these products and the Treasury Select Committee has questioned Clydesdale in relation to the matter. Following the Treasury Select Committee discussion, Clydesdale agreed to review past sales in relation to these products. There is no formal scheme for these reviews and complaints will not be reviewed unless instigated by the customer. Other banks are also entertaining complaints in relation to fixed rate loans.
The detriment experienced by customers in relation to these products, often called tailored business loans or similar, can be as bad, if not worse, than stand-alone hedging. Many customers find themselves locked into expensive deals which carry high breakage costs that the customer cannot afford, tying them to the bank. The bank then often relies on a covenant breach to increase the customer’s rate, making repayment even more difficult. Several small businesses have been unaware of breakage costs attached to their fixed rate loan until such time as they attempt to refinance or repay all or some of the loan.
A complaint in relation to these products can be a lifeline for small businesses as if properly negotiated at the outset, suspension of certain payments can be agreed with the bank to allow the business to survive until their complaint is resolved. Redress can be in the region of 25% of the borrowing which will obviously provide a business with much needed cash injection, together with providing them with relief from the prohibitive break costs. Although the banks are keen to suggest that complaints are simple, they are in fact highly complex and expert legal advice is highly advisable.
Pollock Fairbridge Solicitors offer a unique no win, no fee service in relation to these claims. Paul Fairbridge has acted in over 100 cases involving the mis-selling of complex financial products, having recovered over £6.5m for clients.
Pension regulation has become far more relaxed over the past decade and several individuals have been advised to transfer their existing pension scheme into Self Invested Personal Pension Schemes (SIPP). SIPPS are managed by trustees and allow the individual to invest in a range of investments which are held until the individual retires. Unfortunately following various pension freedom legislation changes, several advisors recommended transferring existing final salary pension funds into a SIPP on the promise of high returns.
Many SIPPs have been created for individuals to hold unsuitable investments such as risky foreign property, forestry investments, time shares, car parks, storage pods, farms and unregulated precious metal markets. These investments often promise extremely high returns which cannot be achieved. The investments usually lack ‘liquidity’ which means that funds cannot be taken out if the investor changes their mind.
It is essential that a claim is made against the person selling the investment as soon as possible. The sooner a claim is made, the more chance the investor has of recovering some or all of their funds. If the broker, SIPP trustees or investment is insolvent, we may still be able to assist with a claim to third parties, such as the Financial Services Compensation Scheme. As solicitors, we can advise you in relation to litigation options including pursuing indemnity insurers.
Global Restructuring Group (GRG) of Royal Bank of Scotland
Following the financial downturn the Royal Bank of Scotland placed several businesses with GRG, a group within the bank designed to assist businesses with restructuring, increasing profitability and managing cashflow issues. In reality the group was an independent profit centre within the bank and several customers experienced extremely onerous conditions being imposed upon them when transferred to GRG. This included:-
- Margin increases of up to 4%
- Introduction of ‘risk fees’ or other penalties;
- Forcing the company to enter into Property Participation Agreements giving the bank a substantial upside on the sale of a property;
- Forcing the company to enter into an Equity Participation Agreement, giving the bank shares and additional control over the company’s affairs;
- Cutting off or reducing the company’s overdraft, creating substantial cash flow issues;
- Requiring additional security, personal guarantees and increasing the risk to directors;
- Placing expensive consultants within the business and levying substantial fees for their services;
- Revaluing assets on a desktop basis to manufacture a default on loans; and
- Requiring substantially increased management reporting, depriving the business of their most important people.
Following an independent report instructed by the Financial Conduct Authority and conducted by American financial consultancy Promontory, RBS agreed to set up a scheme to address issues experienced by customers whilst in GRG. Pollock Fairbridge Solicitors are assisting several clients through this process. Ensuring that the submission to the bank includes all of the necessary information is critical to success.
Several mortgages and investments have been mis-sold to individuals by financial advisors and bank advisors. In particular lifetime mortgages, foreign exchange mortgages, low yield short investment bonds and other unusual products were regularly advised prior to 2009. Often people don’t realise that there is a problem with their investment or mortgage until it is too late. We can assist with most issues relating to a mortgage or investments.