FOS u-turn over interest rate swap mis-selling
Lenders could face a significant increase in the number of claims for mis-sold interest rate swaps after the Financial Ombudsman Service (FOS) reversed two of its decisions on recent complaints.
It was reported the FOS ordered two banks – referred to only as ‘Bank E’ and ‘Bank S’, although understood to be two of the UK’s leading high street lenders – to pay hundreds of thousands of pounds in compensation to two clients mis-sold these complex derivatives.
One case, involving an unnamed hotelier, saw the FOS overturn the original decision after it deemed the lender to have sold the swap “primarily for the bank’s commercial convenience and with little or no attention to the needs of its client”. It has recommended the lender compensate the client in the region of £500,000.
It is estimated that 40,000 small and medium enterprises (SMEs) are affected by interest rate swap mis-selling. However, with this latest news, these figures could rapidly increase; in fact many in the industry predict totals to reach 100,000.
Conservative MP and chairman of the recently launched all-party parliamentary group on swaps mis selling, Guto Bebb, has described interest rate swaps mis-selling as “bigger than PPI [payment protection insurance]” which has already cost lenders in excess of £10bn.
Barclays have set aside £450m to cover the cost of financial redress, the largest provision to date, while HSBC and RBS have also confirmed they have earmarked smaller figures to compensate those affected.
Content correct at time of publication