It has been announced that four banks have agreed a settlement with the FSA over “serious failings” in the sale of interest rate swaps to SMEs, including farmers.
The four banks have agreed to compensate customers who were mis-sold interest rate hedging products, which were supposed to protect them against the risk of interest rate movement.
The settlement comes after hundreds of customers complained that they were locked into agreements by high exit fees, were forced into hedging in order to get loans, and sold products under advice from staff.
Since 2001, it has been reported that banks have sold about 28,000 interest rate protection products to customers, meaning there could be thousands of potential claimants, with many of these expected to be farmers.
One economist said that many farmers were targeted, because they were largely owner-managed businesses; adding: “Farmers traditionally have a particularly good relationship with their bank manager as they often have been with their banks for a long time. People trust their bank manager and think he or she is acting in their best interest.”
It is believed that under the settlement agreement, compensation rates will vary from customer to customer and not all businesses will be offered money; instead other measures could be offered including a mixture of cancelling or replacing existing products, together with partial or full refunds, said the FSA.