Financial watchdog to start investigation
A Norfolk businessman said yesterday that he felt vindicated in his decision to challenge the banks over claims of mis-selling a complicated interest rates product to smaller firms after the financial watchdog said it was launching an investigation into the issue.
Paul Adcock, managing director of Watton-based electrical retailer Adcocks, was left counting the cost of a scheme designed to help businesses ride out spikes in interest rates after racking up �175,000 in bank charges.
All the major banks were involved in selling the so-called derivative products, which saw hundreds of smaller businesses across the country left thousands of pounds out of pocket, sparking a national 'Bully Banks' campaign.
Yesterday, the Financial Services Authority (FSA) said business owners who were mis-sold interest-rate swaps suffered 'a difficult and distressing experience, with many people's livelihoods affected'.
The FSA, which has spent the past two months reviewing the sale of interest-rate hedging products, talking to more than 100 customers who came forward, said it found 'serious failings'. Poor sales tactics were uncovered including failing to provide sufficient information on the hefty exit costs involved, failure to gauge the customers' understanding of risk and found rewards and incentives were a driver of these practices.
As well as offering redress directly for those customers that bought the most complex products, HSBC, RBS, Lloyds and Barclays have also agreed to stop marketing certain hedging products to retail customers.
Not all businesses will be owed redress, the FSA added, but for those that are, the exact redress will vary from customer to customer. This exercise will be scrutinised by an independent reviewer at each bank, appointed under the FSA's powers.
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Mr Adcock, who is in talks with lawyers about reaching a compensation deal with his own bank, Barclays, over the issue, welcomed the findings, which are set to be taken up by the House of Commons Treasury Select Committee.
'We allowed ourselves to be conned by people we thought we could trust,' he said.
'It's tremendous that we have been recognised, but the sad thing is that it's good hard-working people who have been duped by the banks into these arrangements and it's brought them to their knees, that's the tragedy of it.'