Update on SWAPs compensation: what are consequential losses and how do you claim for them?

Update on SWAPs compensation: what are consequential losses and how do you claim for them?

Over the last 18 months, Gosschalks has played a leading role in recovering millions of pounds for clients who have been mis-sold Interest Rate Hedging Products. These products, which were sold to ‘unsophisticated’ smaller businesses, have caused significant financial losses to both local and national clients.

You can read about Gosschalks helping local businesses win SWAPs compensation here.

An update to the FCA review

Under the Financial Conduct Authority (FCA) review scheme, many businesses have been awarded redress. But now they’re having to consider what remedies they may have for consequential loss. This is arguably the most controversial and complex part of the entire process.

What are consequential losses?

Consequential losses are those losses which were caused by having to make hedging payments to the bank.

How do I claim for consequential loss?

What sums you can claim for and how to evidence them requires an understanding of complex legal principles surrounding causation and foreseeability. Sadly, the banks are refusing to provide individual customers with much help with these concepts. Matthew Fletcher, Head of Commercial Litigation at Gosschalks, explains:

“Each consequential loss claim is different to the next. One business may have had to take out loans to cover their hedging payments. Another may have lost out on development opportunities or had to make redundancies.

“There is no hard and fast rule on what could be claimed, but in our experience, common consequential losses could include:

  1. Extra banking fees caused by the hedging product. Plus any associated fees for accountants, surveyors, monitoring costs etc
  2. Extra administration costs. These include interest for delayed HMRC payments, increased professional fees, or the costs of making redundancies
  3. Sums lost due to a missed opportunity. For example, a missed opportunity to make further profit
  4. Claims for loss of goodwill because the hedge has resulted in the customer’s financial situation worsening, causing negative publicity and further losses

"But the types of consequential losses which can be claimed is non-exhaustive and fact sensitive. Some people might not appreciate what they can claim for and, as a result, are missing out.”

If you have a potential consequential loss claim…

We advise you to seek legal representation to help you identify and substantiate your claim.  While the FCA has suggested that customers can seek redress from banks without involving lawyers, many have argued that this advice is misguided. Nigel Beckwith, Head of Company & Corporate at Gosschalks, explains:

“Any claim for consequential loss must follow established legal principles to be successful. Although many customers have managed to obtain a basic redress without the need for legal advice that does not mean that redress compensates them for their true losses. We advise these customers to seek help to ensure they recover their full entitlement.”

Need advice? We can help you

Call Nigel Beckwith now on 01482 324252 or email njb@gosschalks.co.uk.

Click the department links below to find out more about how we can help you:

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