VICTIMS of a multibillion- pound loan mis-selling scandal have been urged to contact the financial regulator as it carries out a major investigation.
MPs issued the call as the Financial Services Authority (FSA) probes the practice, exposed by The Herald earlier this month, which has cost thousands of struggling firms billions in extra bank payments.
The inquiry centres on interest rate swap agreements (IRSAs) attached to business loans, with predictions the scandal is on course to become the business industry's version of the payment protection insurance (PPI) scandal.
The issue erupted in the House of Commons yesterday as MPs accused banks of intimidating customers by threatening to withdraw their credit if they complained about mis-selling.
Damaging allegations were aired by MPs about the mis-sale by RBS, Lloyds, Barclays and HSBC of IRSAs to small businesses, and both Labour's Treasury spokesman Chris Leslie and Treasury Economic Secretary Chloe Smith urged victims to ring the FSA's helpline.
Ayrshire Labour MP Sandra Osborne, praising The Herald's campaigning on the issue, urged banks to abandon "stalling tactics" with aggrieved customers, adding: "It is not in the interests of the banks to have another big mis-selling scandal in a very public way."
Ms Osborne said the case of a small business in her constituency, which was sold a swap agreement by Bank of Scotland, showed how banks "did not abide by the rules of ensuring that the product was appropriate, in the customer's best interest and fully understood".
She said that despite a 20-year relationship with the business, the bank's behaviour had been "reprehensible".
When asked to produce the tape-recording of the sales conversation, she said the bank "firstly said they did not have the tapes, then said they had been lost in the wake of the bank merger, then said they had been destroyed because they were only kept for a year – how convenient for the bank",
She added: "The bank refused a meeting with anyone who has real decision-making power, and issued a glib, bland response which does not engage in any way with what was a very serious complaint."
The Herald has talked to more than 50 businesses to document bank mis-selling of IRSAs, and yesterday we revealed how salesmen for the products could earn from £300,000 to £1m a year.
LibDem MP Ian Swales said: "Banks are working for themselves first and their clients second – remember Goldman Sachs described their clients as 'muppets'."
Guto Bebb, the Conservative MP who initiated the debate, said businesses felt unable to complain because they feared reprisals from the bank, while others could not afford to launch legal action. There were already "examples of loans being called in and overdraft facilities being taken away from businesses taking action". He said he was concerned banks had settled many cases out of court but only with gagging orders to prevent discussion.
Tory MP Dominic Raab said he knew of one business that had been "made to sign a legal waiver not to take action, or the bank will foreclose".
Mr Bebb added: "I call upon the FSA to ask the banks for written assurances that they will not adversely treat any business that makes a complaint."
Mike Freer, a Conservative MP and former Barclays banker, said he was "shocked and appalled" at the treatment by HSBC of a widow with a small buy-to-let portfolio, who had been sold a complex hedging product in one phone call.
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