Interest Rate Hedging Products (IRHPs)
What are they?
These are financial products which are designed to enable customers to manage fluctuations in interest rates. Examples of these are swaps, caps, collars and structured collars.
The products were sold to thousands of small firms when they had taken out loans from their banks, and were supposed to protect them as borrowers from the risk of interest rates going up.
In 2012 the Financial Services Authority (now known as the Financial Conduct Authority) identified that many of these interest rate hedging products (IRHPs) had been mis-sold by the banks to their customers. For example, a large number of businesses claimed to have been sold IRHPs without having the risks involved properly explained to them, or pressured into buying the products by being told that the IRHP was a condition of the loan being granted, or even having been sold them for loans which did not exist.
The banks involved (namely the high street banks) agreed to undertake a review of all their sales of IRHPs made to customers classified as ‘unsophisticated’, since 2001. The full review started in the UK in 2013. A number of these products were also sold within the Bailiwick, and although there has been no explicit requirement for the banks here to carry out such a review, the relevant banks have generally done so.
All customers potentially affected should by now have been contacted by their bank. However, if you have any queries, or you think you may have been mis-sold such a product and have not yet been contacted, the Commission would suggest that you get in touch with your bank in the first instance. More information can also be found on the Financial Conduct Authority’s website.
If you have a complaint you wish to raise against your bank you can find out further information on the Commission's 'How to Make a Complaint' page.