Four of the UK’s main high street banks will be forced to provide compensation for the mis-selling of interest rate protection products to small businesses, the Financial Services Authority (FSA) has announced.
The FSA has reported ‘serious failings’ relating to the sale of ‘interest rate swap’ products, which are designed to protect businesses taking out loans, in the event of interest rate rises.
According to the FSA, the mis-selling of the insurance has had a severe impact on a large number of those businesses that took out the cover.
Martin Wheatley of the FSA said, ‘For many small businesses this has been a difficult and distressing experience with many people’s livelihoods affected’.
Some of the problems identified include a lack of clarity regarding the cost of stopping a product, failure to check whether a customer understood the risk, and the sale of products based on the personal rewards reaped, rather than the customer’s needs.