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Vedanta Hedging call for faster consequential loss payments for mis-sold swaps in The Times

Abhishek Sachdev, MD of Vedanta Hedging, warns SMEs that the delay to consequential payments to SMEs mis-sold swaps by Banks could mean they are time-barred from taking legal action.

Whilst there is real pressure being applied to the Banks to complete all of the ‘Basic Redress’ reviews by May 2014 (every previous deadline has been breached), there is no pressure or time-line for the completion of the consequential loss payments.

This is important, because in our real experience of assisting solicitors and barristers with advice, we see many SMEs who have very substantial consequential loss claims which are backed by credible forensic experts. By the time that the Banks respond fully to the SMEs regarding the consequential loss payments, if SMEs are disappointed by the outcome, almost all will have passed the six-year legal limitation limit (from date of swap agreement) to commence any legal action.

 

Times article 11th Jan 2014 with Vedanta

Anger at delay to compensate SMEs for interest rate swaps mis-selling as time runs out

Published at 12:01AM, January 11 2014

Thousands of small businesses could miss out on compensation payments from banks for mis-sold hedging products because they are running out of time to take legal action, according to an expert.

Banks are coming under mounting pressure to repay the direct costs of mis-sold interest rate swaps, but they are not being pushed to settle the potentially larger consequential losses, such as lawyers’ fees or even losses incurred from a business folding under the weight of the costs of a swap, according to Abhishek Sachdev of Vedanta Hedging, the consultancy.

Mr Sachdev, who is advising many businesses claiming compensation for interest rate swaps, said: “No one is putting a boot to the neck of banks on this.”

Many businesses which took out interest rate hedges did so in 2005 to 2008, which means that some are already out of time to claim legal redress and others are getting dangerously close to the six-year statute of limitations cut-off.

Mr Sachdev’s warning came as the Financial Conduct Authority (FCA) claimed that it had made progress in getting banks to speed up their assessments of whether business customers deserved redress and to make compensation offers.

Clive Adamson, director of supervision at the FCA 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.”

The FCA has already changed its position on the complex issue of consequential losses from calling for banks to sort out all of the costs in one go to trying to corral them into making the basic repayments first. Cynics believe the move has given banks free range to drag out the remainder of the process so that potential victims run out of time to claim.

The FCA ordered banks to begin paying compensation last May after saying there were serious failings in the way banks sold interest-rate swaps.

The products were meant to insure small businesses against the risk of higher interest rates, but when rates fell, companies were left with bills typically running into tens of thousands of pounds or facing big penalties to get out of the deals.

By the end of December, 18,700 small companies had been invited by banks to have their cases reviewed. A total of 1,040 offers of compensation had been accepted by customers at the end of last month, up from 547 at the end of November. The average payout per case settled stood at £152,500, the FCA said.

Nadia Patel

Nadia has a degree in Business Management and a Diploma for Financial Advisers (Level 4). She has ten years of experience in financial services. This includes FSA regulated adviser roles in HSBC, Halifax and Nationwide. As senior manager at Vedanta Nadia is responsible for managing the office, client contact and marketing for the business.

Nadia Patel

Nadia has a degree in Business Management and a Diploma for Financial Advisers (Level 4). She has ten years of experience in financial services. This includes FSA regulated adviser roles in HSBC, Halifax and Nationwide. As senior manager at Vedanta Nadia is responsible for managing the office, client contact and marketing for the business.