Banks caught mis-selling interest rate hedging products (IRHPs) have so far paid £1.1bn in compensation to customers, the Financial Conduct Authority has revealed.
The move comes after the regulator identified failings in the way nine banks sold IRHPs, and asked for a review of sales to unsophisticated customers since 2001, which began in May 2013.
Banks have sent out 15,000 redress letters to customers to date. Of these, 13,000 include a cash redress offer and 2,000 confirm the sale complied with the rules or the customer suffered no loss.
Every redress offer has 8% simple interest per year added, which is intended to compensate customers for the opportunity cost of being deprived of their money in lost interest or profits.
So far, 7,000 customers have accepted a redress offer, representing a total £1.1bn in compensation from an estimated £3.75bn set aside for this purpose. The banks must also cover the costs of exiting these products, and pay independent reviewers to look at each case.
IB, Bank of Ireland, Co-op, HSBC, Lloyds, Santander, Clydesdale, and Yorkshire Banks met the FCA's end of May target date for sending letters. Barclays and RBS will send out redress letters to the remaining customers before the end of June.
