The High Court in London has dismissed a legal challenge from British lawmakers against a financial watchdog concerning a 2.2 billion-pound ($2.8 billion) bank redress scheme related to interest rate hedging products.
The Financial Conduct Authority (FCA) was under scrutiny for its handling of an independent review of the scheme, in which nine banks – including Barclays, HSBC, and Lloyds – agreed to provide compensation.
The All-Party Parliamentary Group on Fair Business Banking in Britain contended that many individuals were excluded from the scheme initiated by the FCA's predecessor in 2013, resulting in significant harm to their businesses and livelihoods.
These financial products were initially sold to provide protection against increasing interest rates to numerous small businesses. However, after interest rates dropped following the global financial crisis, customers were unexpectedly burdened with additional charges, sometimes amounting to tens of thousands of pounds.
As part of the redress scheme, banks committed to compensating those wrongly sold the products between 2001 and 2011. Nevertheless, a "sophistication test" denied eligibility to those with turnovers exceeding 6.5 million pounds and more than 50 employees.
Despite an independent review indicating the exclusion of these sales was unjustified, the FCA chose not to act upon it, a decision later validated by the High Court stating the FCA was within its rights to differ from the review's conclusions.
A spokesperson for the FCA expressed hopes that the court's ruling would bring closure to past decisions made over a decade ago, emphasizing the swift and equitable resolution that secured 2.2 billion pounds for numerous small businesses.