East Yorks firms face payments backlash after banks mis-selling
THE Financial Services Authority's review of the Interest Rate Swap Agreements (Swaps) sold by some leading high street banks has found 90 per cent were mis-sold to SMEs, who are now faced with making crippling payments for the duration of the agreements.
Swaps cover a range of financial products aggressively sold to individuals and SMEs, to hedge against and protect customers from rises in interest rates and loan repayments.
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However, the complex nature of these products meant when interest rates fell dramatically, the interest charged on the loan would "rebound" to the rate cap under the agreement, resulting in thousands of customers being charged interest at significantly higher rates.
Other products were mis-sold where the sum hedged was in excess of the amount of the loan or the term of the hedge lasted after repayment of the loan.
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In June 2012 the FSA revealed "serious failings" in the way the banks had been selling these products, leaving them exposed to claims from customers. In many cases customers were mis-sold the products because:
The banks did not fully explain the financial implications should interest rates fall.
Customers were put under undue pressure to take out the policy or given incorrect information about its requirements.
Customers were not made aware of the substantial exit / cancellation fees.
The FSA has now said that a "significant portion" of these cases are likely to result in customer redress.
However, there is a six-year limitation period for claims for negligent financial advice.
If you suspect you or your business has been the victim of mis-selling of Swap agreements, you should seek immediate legal advice.
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