Michelle Barrett of Credit Claims, a leading financial claims company, says it comes as no surprise that the high st banks have once again been found wanting when it comes to putting the needs of their customers before profit.
In a review on the sale of Interest Rate Swaps to small and medium sized businesses, the Financial Services Authority (FSA) found that 'over 90% of sales did not comply with one or more regulatory requirement'. They have now told the Big Five to carry out a full review of the sale of these products and to offer compensation where appropriate.
Interest Rate Swaps or Interest Rate Hedging products are a type of insurance sold alongside business loans. The idea being that should interest rates rise, the customer would be protected by the insurance policy. What customers weren't told about was the implication of a significant drop in interest rates as we have seen over the last two years. Many now find themselves locked into expensive loan repayments, with hefty penalties if they want to repay the loans or refinance to another lender.
Michelle Barrett said ''We welcome the more robust approach adopted by the FSA on this occasion. Given the problems with mis sold PPI and mis sold investments, the regulator clearly did not want this to fester on for years to come''
The banks will focus their attention on 'non sophisticated' business customers, those that are unlikely to have understood the complexities of these products. Each case will be reviewed in detail and where redress is due, the FSA has stated it should be 'fair and reasonable'. The FSA first carried out a review of Interest Rate Swaps in June of 2012 and expressed serious concerns about the advice given to bank customers. It then decided to carry out a more detailed assessment leading to its latest findings.
Michelle Barrett commented ''Our concern is that many business customers classified as 'sophisticated' will be excluded from this review on the assumption they should have understood what they were signing up for. This could mean some businesses mis sold Interest Rate Swaps, missing out on compensation because of an assumption the FSA has made. We think the banks should review all sales of this very complex product. Our message to anyone who has taken out one of these hedging products is to seek legal advice about their options''
