The FSA announced yesterday that some banks have mis-sold interest rate swaps (IRS) to potentially thousands of small and medium-sized businesses.
This is following the news I reported last week, that a test case involving alleged mis-selling of IRS will be heard at the High Court this October: Interest rate swap
The FSA said they had found ‘serious failings’ with the products, which are designed to protect firms taking out loans against rising interest rates. They have spent the last two months investigating the matter, talking to some 100 businesses to gather evidence.
Barclays, HSBC, Lloyds and RBS have agreed with the FSA to provide compensation in appropriate cases.
Since 2001, around 28,000 interest rate protection products were sold to thousands of small businesses.
The businesses affected should now be contacted by their bank to instruct them whether they are included in a review of these sales.
While this is good news for small and medium-sized businesses who may be struggling with the repayment terms of the IRS deals, it is another major blow for the banking sector, following the PPI scandal which affected consumers, and most recently, the interest rate fixing probe.
By commercial solicitor, Leanne Millhouse