The FinanciaL CONDUCT Authority (FCA) interest rate hedging product review: what it means for our customers
FCA REVIEW INTO INTEREST RATE HEDGING PRODUCTS
On
29 June 2012 the Financial Services Authority (the regulator at the time; in the remainder of this text referred to as the Financial Conduct Authority ("FCA1")) announced it had reached agreement with a number of banks,
including Lloyds Banking Group, (hereafter referred to as “the Group”)
regarding the action to be taken in relation to sales of interest rate
hedging products to small and medium businesses from December 2001
onwards. As part of this agreement, we are currently undertaking a review
of certain transactions entered into by customers.
WHO IS INCLUDED WITHIN THE REVIEW
We are taking this matter seriously and have already written to those customers who
do not meet the sophisticated criteria as defined by the FCA and purchased Structured Collars to confirm that their case
will automatically be considered to be part of the review.
We have also written to customers who purchased other interest rate hedging products
and who may be eligible for inclusion within the review. We have informed them
that they are potentially within scope and that they do not need to take any further
action at this time.
Now the review has formally begun customers will be assessed to determine
whether they are deemed to be sophisticated as defined
by the FCA. Depending on the outcome of this assessment, customers
will be contacted to either:
- Invite
them to request inclusion within the review, and give them the opportunity to
present their version of events along with any additional information they
would like to be considered that is pertinent to the sale of the product: or
- Inform
them that they have been assessed as sophisticated and are therefore not
eligible to have their file reviewed.
If, during the period of the review, we receive a complaint from a customer in
relation to the sale of an interest rate cap, then this will also be dealt with
as part of the review provided:
- The complaint is received prior to the review being closed; and
- The customer does not meet the sophistication criteria, as defined by the FCA.
In these circumstances the customer will benefit from having an Independent Reviewer review any proposed outcome to check it is fair and reasonable.
Customers with interest rate cap products who complain after the interest rate hedging
products review is completed will be dealt with in accordance with the Group’s usual
complaints handling procedures, without the involvement of an Independent Reviewer.
See How to Voice Your Concerns for more information.
Customers who wish to make a complaint should write to:
CB-IRHP
Interest Rate Hedging Products
Lloyds Bank
PO Box 70386
London SE16 9ED
Customers who receive a letter informing them that
they have been assessed as sophisticated and who wish to contest that
assessment should write to the the CB-IRHP team at the address above.
OUR COMMITMENT TO OUR CUSTOMERS
We are committed to supporting customers who may be
experiencing financial difficulties and will seek to prioritise such cases in
our review process.
We have also confirmed that (except in exceptional
circumstances, e.g. where this is necessary to preserve value
in the customer’s business) we will not foreclose on or adversely vary existing
lending facilities, without giving prior notice to the customer and obtaining
their prior consent, until a final redress determination has been issued and redress
where appropriate has been provided to the customer.
Customers should continue to make payments to meet
their contractual obligations on existing transactions while the review process
is ongoing.
Following the British Bankers’ Association (BBA) December announcement, customers in financial distress who wish to suspend their payments in relation to their interest rate hedging product should contact their Relationship Manager.
Their request will then be reviewed and their financial position assessed with regard to their ability to make payments under their interest rate hedging product. Where we conclude that they are in financial distress we will, at their written request, suspend the collection of hedging product payments pending the outcome of the formal review process. This review will be carried out in conjunction with the Independent Reviewer and the FCA.
Should the Group agree to the suspension of payments this will not constitute an acknowledgement or admission of any wrongdoing on the part of the Group. The Group will reserve all its rights including with respect to the suspended payments and/or any other defaults, notwithstanding the final outcome of the formal review.
The FCA has published a detailed explanation of their work and findings, next steps
and what this means for customers. We would encourage all customers who think
they might be affected to read the FCA website.
QUESTIONS AND ANSWERS FOR CUSTOMERS
Q: Which customers are included in the review?
The
relevant transactions are interest rate hedging products sold by the Group
on or since 1 December 2001. The FCA has defined a customer (for the
purposes of this review) as those categorised by the Group as a private customer for sales on or before 31 October 2007
and categorised as a retail client for
sales on or after 1 November 2007.
Q:
What is an interest rate hedging product?
This
is a hedging product which is separate to a
lending arrangement and is for the purpose of securing a profit or avoiding a
loss by reference to interest rate fluctuations. Examples of hedging products
include an interest rate swap and an interest rate cap or collar.
Q:
I have previously made a complaint to the Group about an interest rate
hedging product…will I be treated differently?
The
FCA’s review does not exclude customers who have complained. If you are
a customer who is included in the review and have previously made a complaint,
irrespective of outcome, the Group will still be writing to you.
Q: What if I complain now?
If
you do make a complaint to the Group about the sale of an interest rate hedging
product and it is established you are a customer who is included in the review
your complaint will be reviewed using the same standards as agreed with the
FCA. If you make a complaint, and we determine you are not a customer who
is included in the review, we follow our existing complaint handling
standards.
Q.How do I complain if I am deemed to be out-of-scope of the review?
If
you have received a letter informing you that you have been categorised as
sophisticated (as defined by the FCA) you will not be included within the
review. In these circumstances you will be informed of the criteria used to
assess your case as not in scope and provided with details of how to challenge your sophistication decision should you seek to do this.
Q. Should I use a specialist claims management company or
a law firm?
It is your customer's choice if you want to use a claims management company or a law
firm. There
are specialist claims management companies and law firms who may offer to submit
your complaint to the Bank or the Financial Ombudsman Service. However,
they will charge for using their services and this could involve the payment of
a significant fee to a claims management company (relative to the amount of any
redress received). The outcome will not be influenced by the use of a service provider should you engage one. The Group does not consider that customers need to use
a claims management company because this is an FCA led process which is
straightforward and verified by an Independent Reviewer.
Q.
What if I disagree with the review outcome?
The Independent reviewer will review all aspects of the redress exercise
and Past Business Review which will be overseen by the FCA.
If you are not satisfied with the outcome of your review, and you are
eligible, you may be able to refer your complaint to the Financial Ombudsman
Service or choose to litigate. Please refer to the Financial
Ombudsman’s website for further information.
Q. I have been sold an interest rate hedging product by the Group but it has
matured or been terminated?
The
review covers all interest rate hedging product sales to customers meeting
the FCA’s definitions irrespective of whether the arrangement is still ongoing.
Q. Are Fixed Rate Loans hedging products?
Fixed Rate Loans do not meet the FCA’s definition of an interest rate hedging product and so customers who have had, or currently have, a Fixed Rate Loan but do not have an interest rate hedging product will not be included in the review.
Q: I wish to speak to someone
about my circumstances?
The
Group has established a helpline on 0845
602 3076 or 020 3280
8995 for
customers who wish to ask questions about the FCA Review and the
Group’s response. This helpline is available Monday to Friday 9am to 5pm.
Upon invitation to the review - a customer will be assigned a Case Handler who will be their point of contact throughout the review process.
1 On
1 April 2013, two new financial services regulators, the Financial
Conduct Authority and the Prudential Regulation Authority replaced
the Financial Services Authority (FSA).
