Options for those seeking to bring a mis-selling claim against a bank (Parmar and another v Barclays Bank Plc)

Options for those seeking to bring a mis-selling claim against a bank (Parmar and another v Barclays Bank Plc)

The outcome of claims regarding interest rate hedging products (IRHPs) is generally mixed, with companies having been dealt a number of blows, particularly in respect of consequential losses, and the court having ruled in the bank’s favour. But this doesn’t mean all cases are doomed to fail, as Polly Blenkin, senior associate at Mishcon de Reya LLP, explains following the first ruling of its kind for private individuals (as opposed to companies) bringing a case to trial.

Parmar and another v Barclays Bank Plc

 [2018] EWHC 1027 (Ch)

What are the practical implications of this case?

Though it sounds pretty grim for claimants, when you read the judgment it is clear that, other than the fact that this is the first of such cases to get to judgment, the decision in Parmar should not deter others who have a claim under the Conduct of Business Sourcebook Rules (commonly referred to as the COBS Rules).

On the facts of the case, the judge found Barclays’ conduct to be acceptable—an alternative cap had been offered (a type of IRHP where the total cost of protection is known from the start and won’t trigger a break cost), the bank had presented the customer with illustrations of break costs—notably with specific quantified examples—and the customer made an independent and carefully considered decision. Plainly, these facts will not be present in all cases, particularly against different banks who took different approaches, but even between different relationship managers and those selling the IRHPs, there will be variations in how an IRHP was sold to a customer and how that customer participated in the process. Furthermore, the judge’s comments regarding the effect of an IRHP on creditworthiness will depend on the specific facts and circumstances in a case. The Parmar decision should therefore not undermine other COBS cases which are stronger on the facts and can be easily distinguished.

For customers who entered into the IRHPs as companies, the future is looking rather bleak. However, it is a very different outlook for individuals, or individuals who ran their small business through a partnership. Claims of this n

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About the author:

Meet Emma:

1.Banking and finance lawyer with experience in derivatives, debt capital markets, securitisation and structured finance in London and Paris

2.Likes ballet, playing the harp and holidays

3.Thinks the law is always changing!

Emma trained and qualified at Allen & Overy LLP and worked in their derivatives and structured finance teams in London and Paris.  She then joined the foreign exchange prime brokerage legal team at Deutsche Bank before spending 4 ½ years with Crédit Agricole CIB advising the fixed income and derivatives desk.