Nationwide accused of interest rate swaps mis selling
Building society Nationwide is the first mutual to be accused of mis selling an interest rate swap to one of its business clients.
It is alleged that the UK’s largest building society failed to disclosure the break costs on a £9.8m loan to London-based property developer, Urban Lime, when it sold the SME a commercial loan with an embedded interest rate swap.
Chief Executive of the London-based company, Jonathan Friedman, claims he was never made aware of the significant exit fees at the time of taking out the loan and only made the discovery when he tried to refinance in 2010. Instead he claims he was told it would only cost “in the low tens of thousands of pounds” when in reality it ending up totalling over half of the original loan amount.
However the real issue is the fact the swap was embedded in a business loan and not sold as an independent product. As a result this case falls outside the current perimeters of the Financial Conduct Authority (FCA) redress scheme.
There have already been calls by MPs and swaps lawyers alike for the FCA to intervene and launch a separate review into the sales practice of these products. Simon Cottrell believes the FCA must crack down on this as soon as possible:
“The point has already been made that if the FCA does not look to remedy this sale technique then there is a very strong risk than banks could start to embed everything in order to escape regulation.
“I just hope that, given the number of additional cases this investigation could generate, the FCA is bold enough to take this step and send a very clear message to lenders.”
An initial study at the end of 2013 revealed more than 60,000 swaps had been sold through commercial loans since 2001.
Contact correct at time of publication