In a study, the FSA found that 90% of interest rate hedging products (IHRPs) sold to small businesses since 2001 were mis-sold. The products were found to be ‘complex’ insurance products which were often sold to ‘unsophisticated’ customers.
The products were designed so small businesses could swap the variable interest rates on loans, insuring the business if interest rates rose.
The four banks involved: Barclay’s, HSCB, Lloyd’s and RBS; will now have to calculate which businesses are due compensation and how much.
A review into a further seven banks is expected within the next few weeks.
Anthony Browne, chief executive for the British Banking Assosciation (BBA) said: “Banks will be contacting those companies affected shortly, prioritising those with the greatest need,”
“Any business which is currently facing financial distress and is seeking a suspension of payments should get in touch with their bank immediately.”