The interest rate swap misselling scandal is now well and truly in the public domain. To view a short video from BBC's Rip-Off Britain programme which summarises the issue, click here.
The fees and commissions Banks made by selling these IRSAs to borrowers were often more lucrative than the money they made by lending in the first place. Consequently, they were highly incentivised to sell as many of these as possible - by hook or by crook.
For individual property owners, the following common trends seem to apply:
- Interest rate swaps were sold as a condition of a loan being offered or renewed - they were not optional.
- The Bank explicitly advised that Interest Rates would increase over the term of the loan and therefore the IRSA was required.
- There is a mismatch between the term of the loan and the IRSA, and of course in the case of property, even if the property was sold, the IRSA remained in force, due to the extremely high breakage costs.
- Being a retail property investor, the borrower did not have the financial sophistication to understand the implications of a complex financial derivative such as an IRSA.
An FSA investigation is now under way, and the leading banks have written to all customers explaining that they are reviewing their individual cases for evidence of misselling. This process could take a significant amount of time, and many borrowers have already taken pre-emptive legal action and the results of these cases remain to be seen.
Barclays, HSBC and Royal Bank of Scotland have so far put aside a combined total of about £630m against the cost of compensating customers mis-sold interest rate hedging products by their investment banking arms.
If you think you have been affected by this scandal, please contact Shailesh at email@example.com or on 0208 863 8680 to discuss your case. Please also register your details with the excellent, independent campaigner for affected SMEs and individuals, Bully Banks to stay in the loop.