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TSC reveals terms of FCA interest rate swap misselling deal

MPs have made public the terms of agreements between the FCA and nine banks covering the misselling of interest rate hedging products amid concerns lenders continue to dodge paying redress.

The FCA agreement demands all nine banks pay redress to all purchasers of the products if they are deemed not to meet “sophisticated customer” criteria, based on turnover, balance sheet and employee count.

In addition, the deal requires banks to investigate purchasers of interest rate hedging products other than structured collars, to ask whether they would like their sales process to be included in reviews, and sets out rules on future complaints.

Treasury select committee chairman Andrew Tyrie says he hopes that by publishing the agreements the committee can allow firms to look again how their banks have acted.

“The committee remains very concerned that terms of the FCA’s redress scheme may, in some cases, have provided banks with an opportunity not to provide meaningful redress. Many firms feel that this process has unfairly favoured the banks,” Tyrie says

“The committee expects to comment further on the scheme in its forthcoming report on SME lending.”

The structured collar products were designed to provide protection to business loanees in the case of rising interest rates, but have been subject to large numbers of complaints by small businesses because they also allowed banks to demand increased payments when interest rates moved downwards.

More than £1.8bn in redress has been paid by nine banks to date for misselling the products.

The banks involved in the interest rate swap review are Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland, Santander, Clydesdale and Yorkshire Banks, Co-op Bank, Allied Irish Bank and Bank of Ireland.

The full text of the FCA agreement can be found here

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