Looking back in anger: Interest rate swaps – one year on
They say time flies when you’re having fun but that certainly isn’t the case for the thousands of small and medium-sized businesses still affected by interest rate swaps mis selling.
It has been a year since the Financial Services Authority (FSA now FCA) first discovered serious failings in the sales practice of interest rate swaps and ordered Barclays, HSBC, Lloyds and RBS to undertake a full review interest rate swaps selling.
Yet in the last 12 months only a handful of businesses have received any form of compensation, payments of which are understood to be minimal. Meanwhile the majority of SMEs are no closer to resolving this financial crippling situation. This is despite the damning results of the FSA pilot review scheme which found that a staggering 90% of interest rate swaps sales did not meet regulatory requirements.
While the evidence surrounding mis selling is compelling, the issue of compensation is hazy in comparison. While the FSA did suggest that a significant proportion of the pilot scheme was likely to be eligible for some degree of redress, there has been a real reluctance to provide any transparency of what those amounts may be or what, in fact, constituted “fair and reasonable” redress.
It also failed to set any deadlines or timeframes, something which could be of real detriment to clients approaching their limitation expiry date.
It also refused to include tailored business loans within its review of product mis selling despite the obvious similarity surrounding the lack of explanation of the loan’s substantial break costs.
Since the results of the pilot scheme, lenders have started to write to some affected clients and in some cases, invited them to attend a ‘simple’ fact find meeting. These encounters however have proved to be somewhat of an ‘on the record’ interrogation which could actually jeopardise a client’s chance of redress.
While not in the official FSA review, we have firsthand knowledge that Clydesdale Bank has begun its own investigation into its sales practice of tailored business loan. Mirroring that of the FSA’s, the lender has started writing to potentially affected clients.
However, as with interest rate swaps businesses, must approach any correspondence with extreme caution and have legal representation with them when attending any meeting with their lender to ensure you are not left legally exposed.
Content correct at time of publication