Interest Rate Hedging Agreements – still not a wager!

In VW Property Investments Limited v National Westminster Bank plc, the High Court confirmed that interest rate hedging agreements are not a wager in law.

Between 2004 and 2010, VW borrowed money from NatWest and also entered into five interest rate hedging products ("IRHPs") (four collars and a swap). In 2014 the IRHPs were reviewed as part of the Interest Rate Hedging Product Review ("IRHPR"). Consequently, VW and NatWest entered into a compromise agreement which, with one exception, settled any claim VW had against NatWest in relation to the collars VW had entered into.

VW subsequently issued proceedings against NatWest and pursued the following claims: (a) a "Wager" Claim – alleging that the IRHPs were wagers at law and non-disclosure of their market value when entered into amounted to cheating on NatWest's part; (b) a "LIBOR" claim – alleging that it was an implied term of the swap agreement that NatWest would not manipulate LIBOR rates; and (c) a "Tort" claim – alleging that NatWest owed VW a tortious duty of care in connection with the manner in which it conducted the IRHPR.

The Judge held that VW had compromised its claim in respect of the collars, so the claims could only be pursued in respect of the swap.  The Judge went onto strike out all of VW's claims.

The Court found that the argument that hedging agreements are wagers at law had been rejected on a number of previous occasions. Specifically, the Courts had concluded that the entry into of hedging agreements does not amount to a wager where they have been entered into for a genuine commercial purpose. The Court went onto find that the LIBOR claim was pleaded in a "wholly vague and imprecise manner" and the "Tort" claim was described as 'wholly incomprehensible as pleaded' and 'nothing to do with a so-called breach of duty in carrying the IRHPR'. Both the "LIBOR" claim and "Tort" claim were struck out.

Regulatory Decisions

Buy as You View to pay £939,000 to over 59,000 customers

Rent-to-own provider Dunraven Finance Ltd, trading under the name Buy as You View (BAYV), has agreed to pay redress in the amount of £939,000 to more than 59,000 customers for historic unfair treatment.

BAYV will pay redress to customers who have been charged fees for returned direct debits from 2001 or incurred administration fees charged between November 2012 and March 2014. Customers who have overpaid due to not being made aware of the impact of using a modifying agreement may also receive redress.

An independent Skilled Person was also appointed in October 2015 to review and monitor the firm's plans to address concerns raised by the FCA,

The FCA has also raised concerns about BAYV’s creditworthiness assessments and in particular whether BAYV has been lending to customers affordably. The appointed Skilled Person will monitor BAYV’s reassessments of its lending decisions between 1 April 2014 and 22 October 2015. Customers identified as having been lent sums in excess of BAYV’s own lending criteria will receive redress at a later date. The FCA will provide a further update on this once this exercise has been completed.


FCA Business Plan 2016/7

The FCA has published its annual business plan. The plan cites the following as priority themes over the next year: pensions, financial crime and anti-money laundering, wholesale financial markets, advice, innovation and technology, firms' culture and governance and the treatment of existing customers.