Firm prepares legal action on rate swap banks
A regional law firm is preparing legal action against several banks accused of falsely-selling interest rate deals to customers.
A number of small businesses in Devon and Cornwall are considering action against the banks over allegations of mis-selling interest rate swaps, after the Financial Services Ombudsman reversed two decisions not to award compensation to victims.
Stephens Scown Solicitors, which has offices in Exeter, Truro and St Austell, says it is helping more than 20 small businesses to pursue legal action after they suffered financial losses from swap loans.
The banks are accused of providing inadequate information over the deals which promise to protect businesses from interest rate hikes.
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The loan "scandal" has led many businesses to repay loans at pre-recessionary interest rates, which continued to rise as the base rate fell to an all-time low of 0.5 per cent.
Mark Stubbs, partner and litigator of Stephens Scown, said: "The mis-selling of interest rate swap products is a scandal and has had a detrimental impact on many small businesses. This is an encouraging development, but there is still a long way to go."
The Ombudsman found in two separate cases the bank had given the customer advice and provided information that did not satisfy the criteria of being clear, fair and not misleading.
According to the Financial Services Authority 44,000 swap agreements or other hedging products were, resulting in deals with "crippling" monthly penalty charges or excessive break charges which businesses cannot afford to buy out.
Mr Stubbs explained: "Customers realised that the products protected them from increases in interest rates, but did not realise the full implications of entering those agreements. Those I have spoken to were not given adequate information by the bank before entering into what are highly complex derivative products.
"The banks have entered into an agreement with the FSA to look into the mis-selling of rate swaps and other hedging products, but even four months after the agreement was announced by the FSA, I have not heard of any customers receiving offers of redress."