LONDON (Reuters) -London’s High Court on Friday dismissed a legal challenge brought by British lawmakers against a financial watchdog over the scope of a 2.2 billion-pound ($2.8 billion) bank redress scheme related to interest rate hedging products.
The Financial Conduct Authority (FCA) faced legal action over its response to an independent review of the scheme, under which nine banks – including Barclays, HSBC and Lloyds – agreed to pay compensation.
Britain’s All-Party Parliamentary Group on Fair Business Banking said thousands were excluded from the scheme agreed by the FCA’s predecessor in 2013, and many had their businesses and livelihoods destroyed as a result.
Banks sold the products, which were designed as a protection against rising interest rates, to thousands of small businesses. But when rates fell after the global financial crisis, customers had to pay extra charges of up to tens of thousands of pounds.
Under the redress scheme, banks agreed to pay compensation to those who were mis-sold the products between 2001 and 2011. But a “sophistication test” excluded those with a turnover of more than 6.5 million pounds and more than 50 employees.
An independent review commissioned by the FCA concluded in 2021 that those sales were excluded “without proper justification”, but the FCA decided not to take further action.
A challenge to that decision was rejected by the High Court, which said in a written ruling that the FCA was entitled to disagree with the review’s findings.
“We hope the clarity of the court’s judgment draws a line under decisions taken over a decade ago, which delivered fast, fair redress and secured 2.2 billion pounds for thousands of small businesses,” an FCA spokesperson said.
(Reporting by Sam Tobin; Editing by Catarina Demony)
