Stung by interest rate swaps
finance: A major review by the Financial Services Authority (FSA) has revealed some leading high street banks have been mis-selling complex interest rate hedging products to tens of thousands of small and medium-sized businesses, resulting in losses that could run into billions.
Nigel Beckwith, head of the corporate department at Gosschalks Solicitors, and Will Buckenham of its commercial litigation team, specialise in these types of claims.
Mr Buckenham said the policies limit the risk in interest rate fluctuations and range in complexity from straightforward "swaps" and "caps" that fix or cap the interest rate of a loan, to more complex "collars" and "structured collars".
He said: "The complex nature of the policies means that where interest rates fall dramatically (as has been the case recently), the interest charged on the loan 'rebounds' to the cap, resulting in thousands now being charged interest at a significantly higher rate than normal.
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"A thorough investigation by the FSA has revealed failings in the way the banks have been selling these products. Banks have been failing to ensure their customers understood the risks.
"The FSA has now reached an agreement with ten major UK banks which have agreed to halt the sale of these products and to provide compensation where mis-selling has occurred. Any business that believes their banking facility was mis-sold should seek professional advice to ensure a positive outcome."