The FCA believe up to 60,000 small businesses have been mis-sold interest rate hedging products (IRHP), designed to protect them against rate rises.
According to the FCA’s Chief Executive, Martin Wheatley, these interest rate hedge swaps were sold within commercial loans to SMEs to protect against rises, however the products came with hidden expensive break costs. Wheatley stated that ‘60,000 swaps had sold within commercial loans since 2001’.
These loans are not regulated by the FCA, therefore it may have been easier to impose hidden extra charges. Wheatley is also concerned that future commercial loans will continue to include IRHPs, avoiding regulation altogether.
All big banks have joined a scheme to pay back the companies they have mis-sold swaps to, but so far, this does not include swaps fixed in commercial loans.
Wheatley wrote to the Treasury, warning about the extent of this mis-selling, stressing that something must be done.