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koala_bear

First Swap Rate Miselling Payouts

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http://www.bbc.co.uk...siness-23960102

Amounts make PPI look like chicken feed. Thankfully for the banks only 25,000 customers missold not millions like PPI.

First pay-outs for businesses sold rate-swaps

Terri and Stewart Flett are thought to be the first of tens of thousands to receive pay-outs

The first small businesses to be mis-sold complicated insurance products by their banks have begun to receive compensation.

So far, 10 firms have agreed to accept payments, averaging £50,000 each.

Up to 25,000 more businesses could be in line for compensation, according to the Financial Conduct Authority (FCA).

The banks said that they were working hard to see that those affected received redress as soon as possible.

A couple who own a hotel in Bournemouth are thought to be among the first to be compensated.

Terri and Stewart Flett will receive £350,000, after taking out one of the insurance products in 2007.

Exit fees It is thought about 40,000 small businesses were sold the products in the years between 2001 and 2008.

Those affected include vets, care home operators, hauliers and pub owners.

Many who had taken out a loan with their bank were advised to "hedge" against the possibility of interest rates going up.

In return for higher fees, they were told they would not have to pay extra if the Bank of England raised base rates.

In fact, the Bank reduced rates, from 2008 onwards.

As a result, many small firms were faced with paying much more for their loans, or having to find tens of thousands of pounds in exit fees.

The four banks concerned, HSBC, Lloyds, Barclays and Royal Bank of Scotland, made large profits from the products, known as interest rate hedging products (IRHPs).

Edited by koala_bear

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http://www.bbc.co.uk...siness-23960102

Amounts make PPI look like chicken feed. Thankfully for the banks only 25,000 customers missold not millions like PPI.

Still being referred to as a scandal though - a scandal it is not. This was an intentional and deliberate activity to 'make' money.

And how can a now bankrupt business be repositioned back where it would have been if the bank had not 'taken' it's money and then shut them down?

These banks are criminal and deserve to be treated as such. What do they have to do, to get more than a fine or slapped knuckle?

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just so I have a handle on this (not that I am affected) - what would have happened if base interest rates had risen (or stayed at the normal 4 or 5 %) - would there have been no mis-selling. Is this another example of the downright stupidity of keeping base rates at 0.5 per cent for nearly 5 years.

expect to see a few whingers and compo-chasers on MSE forums about this (even if they are not 'victims') ;)

not condoning anything the banks and the men in suits sold to ill-informed customers - but just to understand.

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just so I have a handle on this (not that I am affected) - what would have happened if base interest rates had risen (or stayed at the normal 4 or 5 %) - would there have been no mis-selling. Is this another example of the downright stupidity of keeping base rates at 0.5 per cent for nearly 5 years.

expect to see a few whingers and compo-chasers on MSE forums about this (even if they are not 'victims') ;)

not condoning anything the banks and the men in suits sold to ill-informed customers - but just to understand.

I think the real problem has 3 elements:

- the swaps were incomprehensible to most customers.

- the customers had no real choice.

- the swaps were asymmetric: while offering prudent protection on the upside they were ruinously expensive on the downside.

In a lot of cases the banks took equity in the defaulting businesses, if they didn't bankrupt them entirely. Another score for the predators.

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I think the real problem has 3 elements:

- the swaps were incomprehensible to most customers.

- the customers had no real choice.

- the swaps were asymmetric: while offering prudent protection on the upside they were ruinously expensive on the downside.

In a lot of cases the banks took equity in the defaulting businesses, if they didn't bankrupt them entirely. Another score for the predators.

A 4th to add:

- the swap was still live even if the loan was repaid early. This is where most of the misselling claims seem to originate.

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https://twitter.com/bully_banks

http://www.bully-banks.co.uk/site/

The site has relevant info - some of it is now private but still worth a look, if any body is interested.

Bully_Banks twitter feed is showing that some of those responsible for the 'selling' were not registered or authorised to sell swaps key factor with the FCA . :huh:

Bully-Banks is again asking the FCA to set out clear principles to identify if a mis-sale has taken place including whether:

The potential quantum of breakage costs was not identified at the time of sale.

The potential quantum of costs under the IRSA in the event of a substantial fall in interest rates was not clearly identified at the time of the sale.

The sales personnel working for the bank were mis-described or incorrectly presented as ‘advisors’ in the sales process.

The cap and collar Swap was a condition of the associated loan.

The length of the Swap was longer than the associated loan.

The nominal amount of the Swap was greater than the associated loan.

The client was clearly unsophisticated and unable to understand a complex financial product such as an IRSA.

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