Confusing process jeopardises bank mis-selling claims

Confusion over procedure means some farmers may be damaging their chance of receiving a full payout after being mis-sold interest rate protection products by banks.

Banks are inviting customers to meetings that often appear to be a “cosy chat”, but are actually a Financial Conduct Authority review – a legal hearing in which farmers’ words are recorded and could be used against them, warns law firm Berg.

Managing partner Alison Loveday said just one clumsy explanation by the customer could deny a business the right to compensation.

“Farmers do not appreciate that the meeting will be recorded as their ‘testimony’, for further use by the bank in the review process and/or court proceedings,” she said.

“The bank typically appoints expert lawyers and/or accountants to represent them at this meeting, but some clients misunderstand and believe these individuals are there to help and represent their business – not the bank.

“There is a lot of confusion out there, and as a result, businesses are not giving themselves the best opportunity to secure compensation and to maximise any payment,” she added.

Ms Loveday had a further warning on farmers entering standstill agreements that exclude the option of litigation on key areas of compensation, she said.

Standstill agreements put a freeze on the six-year claims period provided under the Limitation Act, which allows the farmer to participate in the FCA review scheme while keeping the option open for litigation at a later date.

The problem is some businesses are not taking appropriate advice to ensure all areas of a potential claim are included, leaving some businesses losing their right to litigate.

“Entering into a standstill agreement drafted by the very organisation you are seeking compensation from should be enough for businesses to realise they need to protect their interests, yet many are not taking the correct advice to protect their right to litigate,” said Ms Loveday.

She had seen instances where the standstill agreements did not give consideration to the entire claim, such as leaving a crucial party off a claim. The claim then reached the time limit and the business could not be compensated in relation to that claim, or a specific element of it, she said.

“If you combine both those factors, then clearly many businesses are in danger of fighting with one arm tied behind their backs and with the farming sector particularly vulnerable.

“I’d advise farmers to think twice before agreeing to do things on the banks’ terms and make sure they have ‘equality of arms’. This will inevitably mean making sure the business takes specialist advice on what is a potentially complex claim, and that it is properly represented in all its dealings with the bank,” Ms Loveday said.

A range of interest rate hedging products (IRHPs) was sold to many farmers and other businesses, mainly from the mid-2000s onwards. Many thought they were buying protection from rising interest rates, but had unknowingly also entered into an obligation to pay their banks huge sums when rates fell.

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