Banking giant faces landmark mis-selling case
Key defences relied on by banks in interest rate swap (IRS) mis-selling claims are set to be tested in court this October when the claim of business-owner Sara Pearson against Barclays comes to trial.
The Gazette has obtained copies of Pearson’s claim and the bank’s amended defence, as lodged at the High Court. On the claim form, Pearson says she ‘expects to recover circa £228,354’. IRSs are complex derivatives products designed to protect business owners against a rise in interest rates. As interest rates have fallen, many business owners have questioned the products’ appropriateness.
Key points disputed by the parties include the definition of ‘advice’, the strength and relevance of banks’ regulatory obligations and the appropriateness of banks’ promotional materials.
Pearson, advised by litigation firm Carter-Ruck, contends that Barclays approached her ‘unsolicited’ to recommend the purchase of an IRS. She believed that information presented by the bank was advice (which Barclays denies), and that the bank had not met standards of customer care demanded by the Financial Services Authority.
The bank, the claim says, failed in its contractual and common law duties to Pearson, by ‘expressly or impliedly’ representing the product as ‘low risk’, able to ‘protect her business’, and ‘suitable’.
In its defence, Barclays is adamant that it did not give advice. It cites specific opportunities Pearson was given to seek clarification on the IRS product proposed. In arguing that the bank believed she was a sophisticated customer capable of understanding the product, Barclays’ defence points to the role of the financial controller of Pearson’s PR business.
Research by litigation funder Norton Accord estimated there to be 4,000 potential mis-selling claims against major UK banks amounting to £1bn. Expert witnesses have since told the Gazette they believe the figure to be much higher. One claim, currently being prepared, is for £250m.
A spokesperson for Barclays told the Gazette: ‘We cannot comment on a matter which is currently in litigation save to confirm that we deny the allegations made in the claim.’