Banks found guilty of mis-selling complex interest products to small businesses
The Financial Services Authority (FSA) has found financial institutions guilty of the way interest products were sold to small firms.
The financial watchdog found small businesses had been sold interest rate swap agreements (IRSA) - a highly complicated insurance product which was meant to protect against a rise in interest rates. It is likely many businesses would have taken out a swap to guard against rising loan rates.
However banks failed to advise customers of the potential risks and as interest rates dived in 2008 and 2009, many businesses were left sitting on heavy losses and struggled to repay borrowed debt.
In the FSA’s findings it was reported the banks were found guilty of poor sales tactics including failing to provide sufficient information on the exit cost involved, a failure to properly explain the potential risks, and found rewards were a driver of these practices in a number of firms.
So far the major banks which have reached an agreement with the FSA to pay compensation to the 28,000 of those affected include Barclays, HSBC, RBS and Lloyds TSB, who together have reserved £1.4 billion for reparations, with most of that falling to Barclays.
This latest scandal comes only days after Barclays Bank Plc received a record fine of £59.5 million for misconduct relating to the London Interbank Offered Rate and the Euro Interbank Offered Rate.
Simon Thompson, managing director at Precision Claims believes this is a major blow to the banks, with this latest claims scandal echoing the payment protection insurance crisis that emerged over the past few years, costing the banks millions of pounds.
Commenting on the news Thompson stated, “Thousands of businesses have lost large amounts of money after being mis-sold complex products by their banks, institutions they are reliant on and in this case trusted to agree purchasing IRSA.
“I’m pleased to see the FSA has used its powers to put pressure on the major high street banks and giving the victims an opportunity to receive the compensation they deserve for an initial lack of information or even being told they could be refused credit.”
Precision Claims specialise in compensation claims and can help businesses claim compensation for mis-sold IRSA. For more information visit http://www.precisionclaims.co.uk/services/irsa-claims or call 0844 704 1945.
- Contact Information
- Simon Thompson
- Managing Director
- Precision Claims
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