Interest Rate Mis-selling
In 2012 the FCA identified flaws in the way that banks sold Interest Rate Hedging Products (IRHP) and following consultation the banks involved agreed to contact their at risk customers to offer them redress.
The IRHP’s were aimed at small to medium sized businesses (SME’s) and were marketed as insurance against rising interest rates, for businesses with commercial loans. Problems began when the interest rates began to fall, as the banks had failed to explain what would happen if the interest rates fell or the extent of the break-out costs of an early exit from the IRHP. These failings were further compounded by the banks structuring their IRHP’s so that the protection they offered extended beyond the requirements of the loans.
The products sold comprised the following:
•Interest rate caps – enabling borrowers to cap their exposure to upward interest rate movements;
•Interest rate swaps – enabling borrowers to fix their interest costs;
•Interest rate collars – enabling borrowers to limit interest rate fluctuations to within a simple range; and
•Structured interest rate collars – variants on interest rate collars with non-transparent added costs.
Who is affected by the mis-selling of interest rate hedging products?
These products were targeted at small to medium sized businesses (SME’s) including partnerships, private limited companies, and owner/managers who bought them hoping to reduce the risks associated with rising interest rates.
Do I qualify for compensation?
Eligibility to claim compensation under the FCA redress scheme is based on if you are deemed an “unsophisticated” customer but will be affected by other factors such as the type of product you bought.
You may have been already contacted by your bank, however if you have not there are other options available to seek redress. If you brought an IRHP we recommend that you seek advice to determine the best strategy for you.
How can My Business Counsel help you?
Irrespective of your position we can help you understand your options better, our banking lawyers can assess your case and help you pursue compensation from your bank via the FCA complaints processor through litigation.