Thousands of businesses have now received their formal offers of redress from the banks in relation to the mis-selling of interest rate hedging agreements. However, a large amount are receiving initial redress offers which are unexpectedly low, in that the bank has decided to replace a product rather than cancel it in full. In some cases, no offer of redress has been made at all.

There is no appeals process if you are not happy with the redress offer. You are, however, entitled to submit further documentation and representations to the bank so that the initial review decision can be reconsidered, by the bank and the independent reviewer. If you did not take the opportunity to use a lawyer to submit your initial claim, such a tactic will most likely be beneficial now. However, if your claim was initially submitted by a lawyer, unless there appears to be a glaring error in the decision, one has to question what further information and submissions could be made to affect a change in the bank’s decision-making process.

There are cases where glaring errors seem to have been made. An example of this is where the bank has accepted that the client did not understand the swap - that it was not sold in compliance with the regulations - but the evidence shows that the client wanted to fix, yet the bank have not offered any redress. The decision was based on the fact that the client wanted to fix. This decision was, in my opinion, flawed as it did not take into account the fact that, as a result of the bank’s breaches of the regulations, the client did not know that there were other options other than fixing. Such a case, I believe, should be “appealed” and further information should be provided to the bank to allow it the opportunity to alter the decision and make a more appropriate offer.

Following the submission of further information, the bank and the independent reviewer would consider the new information and then release a further redress decision. This decision would be the final decision.

Should one still be unhappy with the final redress decision, the only route to challenging it is via the Financial Ombudsman Service (FOS) or through issuing legal proceedings at court. The FOS will not be available to all businesses and is, in fact, only available to those businesses which are considered to be small. Historically, the FOS was not very forthcoming in relation to claims surrounding the mis-selling of interest rate hedging products, and very few determinations were positive. There is some thought that the FOS will be reluctant to go against the redress determination provided by a bank. However, until claims are submitted and determined we will not know the generality of outcomes.

Litigation remains difficult for those with relatively small claims (under £1m in general damages) due to the costs. Whilst solicitors may look to accept some cases on a “no win no fee” basis, it is unlikely that this will happen until an amount of paid work has been undertaken so that a full assessment of each case can take place. Clients will need to be aware that, if they want to pursue a case against the bank, they will have to lay out some of their own funds.

A negative redress offer is not the end of the process. However, bank customers must seriously consider what they want to do and how far they are willing to go to get back what they deserve. Customers must also consider, if they had previously gone out on their own, whether now is the time to seek professional assistance.