Columnist

Business banking mis-selling

The UK banking industry has been caught up in yet another widespread mis-selling episode but this time the victims have not been their retail customers, but businesses.

’Swaps’

Many thousands of businesses have been found to have been mis-sold Interest Rate Hedging Products (IRHPs) or ‘Swaps’ by their bank. It is estimated that 40,000 IRHPs have been sold with around 90% of these being found to have been mis-sold. So it’s a big problem for the banks. It is difficult to predict the actual size of the problem, but so far the banking industry has set aside over £3.9billion to pay compensation. This figure could grow as the scale of the problem unwinds.

Businesses can ‘opt-in’ to have the sale of their hedging product reviewed by an FCA-led Review Scheme. If the product is deemed to have been mis-sold, then redress could be due – but not always, as sometimes the Review determines that the business would ‘in any event’ have taken out the hedging product, so no loss has been caused or they are given another replacement hedging product .

For those businesses that are unhappy with the result of their Review, there is an ‘in-built’ Appeal Mechanism whereby a determination can be challenged on the basis of either (i) the provision of new information or (ii) a challenge to the bank’s rationale for the outcome. We get many calls from businesses caught in this situation that are looking for expert help to unravel their case and then professionally present it to get the initial decision changed.

In addition to claiming for ‘direct’ product losses, businesses can also claim for consequential losses. These are losses indirectly caused by the hedging product such as additional bank fees and charges or loss of business opportunity. We have an in-house Forensic Accountant who specialises in consequential loss reports and negotiating redress with the bank solely for IRHPs.

Tailored Business Loans and Fixed Rate Loans

Unlike an IRHP, whereby the commercial loan and hedging product are separate instruments, a Tailored Business Loan (TBL) embeds the hedging product within the loan. These products were sold in large numbers by Clydesdale and Yorkshire Bank, particularly to businesses located in the North of England. This is also a big problem for National Australia Bank (parent company of Clydesdale Bank Ltd) as they have been steadily increasing the provisions to pay redress which are now in the region of £180million. Again we expect this figure to grow.

Similar to Tailored Business Loans, Fixed Rate Loans were also sold in large numbers but by the main high street banks. However, the problem is the same, termination or ‘break costs’ were rarely properly explained.

What you need to do

If you think you have one of these products, you may be able to claim compensation. Please call our specialist team on 0113 323 1950 or email claims@allsquare.co.uk. Based in the centre of Leeds, we are specialists in assisting businesses in the North with this complex problem.

This was posted in Bdaily's Members' News section by Daniel Hall .