Following on from my most recent two blog posts (here and here) on the subject of the ongoing interest rate swap mis selling compensation scheme, the big news for January is that the banks have finally begun to increase the pace of payouts, with compensation reaching £158.6 million in December 2013, according to figures from the Financial Conduct Authority.
This figure is twice the amount paid out in November 2013 (£81.2 million), and whilst this is admittedly huge progress we must remember that this figure represents just a small proportion of the £3 billion set aside by the big lenders to compensate the thousands of businesses across the UK who have been financially crippled as a result of being mis sold complex swap products.
The review of interest rate swap mis-selling formally began in May after the pilot scheme concluded. The intention was that firms would be compensated within 6 to 12 months, but as we are now rapidly approaching the 12 month anniversary of the schemes inception, and there are billions still in the compensation pot awaiting distribution, it is clear the process is to take much longer, despite the fact that the banks have taken on more than 2,800 staff to handle the cases.
That said it is clear to see that the FCA have adopted a far more positive tone with the banks than in previous months when they have been quick to criticise progress (or rather the lack of). New figures from the regulator revealed that 1,040 offers of compensation had been accepted by customers by the end of December, up from 547 in November. In total, by December 7,500 people were in the redress stage and of those, 5,200 have been completed, including those where it was found that no redress was necessary.
The FCA had previously written to the chief executives of Royal Bank of Scotland, HSBC and Barclays to increase the pace of compensation, however, as the FCA points out "the banks' ability to deliver against their projections will also require timely engagement from customers", also commenting "we would like to encourage the 3,700 customers yet to opt-in to the review to do so as quickly as possible."
Director of supervision Clive Adamson said: "Banks have picked up the pace since November; we asked that they focus their efforts on making far more rapid progress in assessing individual cases and crucially in providing redress.
"May remains the target for all offers to have been sent out and the banks involved are working towards that. Any affected business that has been invited to join the scheme and hasn't needs to act now so they can receive the redress they're due."
Over the next few months the banks will start sending out final reminders to customers to encourage as many as possible to participate, before the review is closed for new entrants.
Andrew Brown is a Partner at Cardiff and London based law firm Capital Law (www.capitallaw.co.uk). He is a specialist in financial disputes, including interest rate swaps.