BUSINESS experts in Bolton say many firms with legitimate claims over the so-called “rate swap” mis-selling scandal remain locked into expensive funding arrangements.

A review 18 months ago by the Financial Conduct Authority (FCA) into the mis-selling by the banks of Interest Rate Hedging Products (IRHP) was targeted to be carried out within nine months, but only a fraction of the reviews have been completed.

The FCA has found serious failings in the sale of IRHPs to small and medium sized businesses. They were marketed to customers with loans and fell into four categories.

“Swaps” enabled the customer to “fix” their interest rate; “caps” placed a limit on any interest rises; “collars” allowed the customer to limit interest fluctuations to within a simple range and “structured collars” limited interest rate fluctuations to within a specified range, but involved arrangements where, if the reference interest rate fell below the bottom of the range, the interest payable by the customer may actually increase.

Michael Slater, litigation partner at Bolton’s KBL solicitors, said they were acting for a number of clients.

“Having established what we believe to be areas of concern regarding the sale of a product, we are now seeing a reaction from the banks,” he said.

He is also urging firms invited by banks to discuss their IRHP to prepare their case fully and be legally represented when meeting them.

At a recent London conference organised by a lobby group, it was revealed there is now an All Party Political Group calling for greater impetus to the review process.

There was also strong representation from Yorkshire and Clydesdale bank customers who had been sold Tailored Business Loans (TBLs), as these invariably included an embedded swap product.

Dave Jones, managing director of Bolton’s Progressive Business Mentoring and a former regional commercial banking director said: “The TBLs sold by Yorkshire and Clydesdale included a swap product which retains all the characteristics of a standalone IRHP, in particular the prohibitive costs related to a request by the business owner to exit the product early.

“Invariably, these substantial exit costs were not explained to the customer. At present, TBLs are not included in the formal review process but there is, rightly in my view, clear rationale for their inclusion.”

Mr Jones also said business owners should take care to ensure they do not lose their right to register a claim as a result of being “timed out”.

The Statute of Limitation Act comes into play after six years, providing the banks with a possible defence.