Mis-sold Interest Rate Swaps Leave Businesses In Debt

Banks in the UK have recently been embroiled in a scandal involving mis-sold interest rate swaps with small businesses leaving many businesses struggling to find the money to pay rates which have dramatically increased.  Many have got into debt – some getting by, others having to shut down as a result.

The Financial Services Authority reported that up to 90% of IRSAs may have been mis-sold to small firms. This has caused widespread panic for businesses which have been mis-sold the insurance as it affects their survival, potentially threatening jobs. Investigations have taken place to address the issue and ensure that repayments are fair. These however may not benefit all small businesses as Martin Wheatley, CEO of Financial Conduct Authority, has stated that “it is important to remember that this review is firmly focused on the particular circumstances of each sale. These will determine whether there were failings in the sales process and, if so, whether redress is due.”

Currently, the banks accused of mis-selling interest rate swaps are RBS, Lloyds TSB, Barclays and HSBC who have all started to review cases. It is expected that another seven banks will begin their reviews by the 14th February.

The confusion came about due to the unclear terms outlined within loan contracts, leading to a call for clearer and more easily understandable terms and conditions to be written in order to ensure that this does not happen again.

The FSA’s reaction to this has been to give larger banks a 12 month period to finish their reviews by while smaller banks have a 6 month period. The FSA believes that costs of these reviews could reach an estimated £1.5 billion, despite this banks have reserved only £700 million to account for this.

The British Bankers Association have given advice to those affected by the interest rate swap urging them to contact their lender to resolve the issue.  Alternatively, claims for compensation can be made by the help of a company that does the legwork for you, such as with InterestRateSwapsClaim.co.uk.