Partner Article

Further business loan sales to be reviewed

A further seven UK banks have agreed to review the sale of specialist insurance to small businesses to check that products have not been mis-sold.

Four other banks have already been found guilty of mis-selling interest rate swaps, although there was no presumption of mis-selling at the other seven, according to the Financial Services Authority (FSA). However, if they are found to have mis-sold products, affected customers will receive compensation.

The latest banks agreeing to a review include Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire banks (part of the National Australia Group, Europe), Co-operative Bank, Northern Bank and Santander UK, who account for around 10% of all UK sales of hedging products.

Barclays, HSBC, Lloyds and RBS could face a bill of over £1 billion following an agreement with the FSA to study the sale of 28,000 protection products which have been sold to small businesses since 2001.

Businesses who purchased the product were told that it would provide them with “insurance” against interest rates rising, but when rates fell they were faced with heavy losses.

Many borrowers felt pressurised into buying the products.

Commenting on the latest review Clive Adamson of the FSA said: “Although the number of their sales was smaller and while there is no presumption that mis-selling has occurred, it shows their willingness to do the right thing and ensure their customers who bought these products can be confident that they will be treated on an equal basis.

It is unclear how long the independently assessed review will take.

This was posted in Bdaily's Members' News section by Ruth Mitchell .