Following the announcement at the beginning of July that claims for refunds of mis-sold interest rate swaps could be made against four of the UK´s largest high street lenders, seven more banks have been added to the list of financial institutions guilty of mis-selling IRSAs.
The Allied Irish Bank, Bank of Ireland, Clydesdale and Yorkshire banks, Co-Operative Bank, Northern Bank and Santander UK have agreed to review sales of the interest rate swap agreements (IRSAs) that were sold to small business clients as insurance against rising interest rates.
At the beginning of the month Barclays, HSBC, Lloyds and the Royal Bank of Scotland admitted selling billions of pounds worth of IRSAs to small and medium sized business after being investigated by the Financial Services Authority (FSA).
The FSA introduced a rate swap mis-selling compensation scheme at the time, and estimated that up to 28,000 claims for refunds of mis-sold interest rate swaps to companies were likely. Following the agreement of the seven new banks to conduct a “redress exercise and past business review”, the FSA´s estimate has been revised to 40,000.
Analysts have predicted that many borrowers are unaware that they may be entitled to compensation for mis-sold interest rate swaps to companies and have criticised the process under which the banks will be conducting their review, calculating a “reasonable” compensation settlement and informing their customers.
They say that, due to no time period being implemented for the banks´ reviews to be concluded, many business clients will have no option other to accept what the bank is offering them in the form of compensation. This is because a six year limitation period exists within which time claims for refunds of mis-sold interest rate swaps to companies can be made through legal action and the FSA believes that the majority of mis-sold IRSAs occurred between 2005 and 2008.