The following is a Guest Post by Mr,Paul Simms from Reflect Digital UK.
The Guest Post.:
‘Unsophisticated’ British firms due to be compensated for mis-sold interest rate swaps
British companies hoping to file a claim against the banks after being mis sold interest rate swaps are said to be running out of time to do so. The Financial Services Authority have estimated that around 90% of interest swap contracts over the last six years may well have been done so illegally. The FSA has attempted to establish a distinction between ‘sophisticated’ and ‘unsophisticated’ businesses, with the former being likely to have been aware of the risks that they were taking when they signed up for the products. It’s also been claimed by many sources that by introducing products that successful businesses were unlikely to sign up for, the banks were in effect targeting vulnerable businesses that were only ever likely to be harmed by the services.
It’s hoped that the full reviews will be completed within a six month period. Companies that did not sign up for the hedging products before 2007 are not permitted to take action due to the Limitation Act 1990, which demands that claims must be put forward within six years of the products being signed up for. Companies that suspect that they may be eligible for compensation have been urged to act at the earliest opportunity to ensure that their claims will be dealt with.
The interest rate swaps scandal is the second mis-selling scandal to hit the UK’s banks in recent years. It comes after scores of British customers were compensated after being tricked into signing up for Payment Protection Insurance – a scheme that was supposed to protect customers if they could not make credit repayments after falling ill for instance. Many customers found that they were signed up for products when they didn’t want, need or ask for them, often without their consent.
The UK arm of Barclays Bank has already set aside some £850m for compensating the victims of mis sold interest rate swaps. UK Solicitors like Lamport Bassitt have set up specialist departments within their firms to deal with swap mis-selling claims. The FSA have ordered a number of UK banks to review cases of interest rate swaps and to provide redress if the products were found to have been sold unfairly. With the interest rate swaps, customers were promised a ‘fixed rate’ of interest on loans by being compensated by the banks if interest rates went up, and paying extra to them if they went down.
However, when interest rates started to fall to historic lows, customers were hit hard, being forced to pay substantial amounts to the banks and finding that the costs involved in ending the contracts were also exceptionally high. Businesses were also alarmed to find that the ‘swaps’ and ‘loans’ were two different products. This meant that even when a loan was paid off, they were still obliged to continue funding the ‘swaps’.
– http://www.swapmissellingclaims.co.uk/
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