MPs are preparing to file an official request to the Treasury select committee to launch an inquiry into the potential misselling of interest rate swaps.
The swaps are designed so banks cover the cost of increased payments in the event of interest rate rises while if rates fall, the customer has to pay the bank.
A total of 40 MPs agreed to make the request to the TSC and to apply for a backbench business debate at a meeting in Parliament last night which was arranged by Conservative MP for Aberconwy Guto Bebb. He said the MPs were briefed by lawyers involved in taking misselling cases to court who told them sales staff misrepresented the products, many of which were sold between 2006 and 2008.
Speaking to Money Marketing, Bebb says: “I do no think there was an anticipation rates would fall from 5.5 per cent to 0.5 per cent and stay there for as long as they have. But they were sold to guard against the possibility of rate increases. The bear-trap is that people were not made aware of the downside that if rates did fall they would face penalties.”
“Some of the cases we have seen show these are not only inappropriate products but were also missold deliberately.”
He adds that the request will be submitted by the end of the week and that due to the MPs involved being from four political parties there is a good chance the backbench business committee will accept their call for a debate.