A Sky News investigation has uncovered evidence High Street banks deliberately mis-sold interest rate protection, leaving hundreds of firms struggling to meet repayments.
In an interview with Sky News, ex-HBOS and Lloyds TSB employee James Ducker claims banks flouted guidelines and put profits before customers' interests.
The products are known as 'swaps' because the bank and customer exchange or 'swap' loan repayments. If interest rates rise, the bank covers the increase in repayments for the customer but if rates fall, the customer pays a fee back to the bank.
Banks contacted by Sky News said they always provided enough information to highlight the potential risks of any products they offer. However, investors who entered into 'swap' arrangements claim the risks of low interest rates and exit fees were not explained to them.
Ducker told Sky: "We were selling protection against rates increasing with a lack of consideration if rates fell.
"The bank was protected more than the customer and it was normal practice to emphasise the rewards and de-emphasise the risks.
"The pressure to sell these products was immense. We weren't there to help customers or mitigate their exposure.
"My manager described it to me as giving the customer an umbrella, then when it starts raining taking the umbrella away.
"If rates go up, the bank wins. If rates go down, the bank wins. Was it ever explained to the customer in that way? No."
Swaps should only be sold to investment professionals but it is claimed the banks were marketing them to amateur investors, who did not understand the risks.
High Street banks who sold swaps could now face a wave of cases brought by firms which have gone into administration after struggling to pay the fees resulting from historically low interest rates.
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