This morning, Abhishek Sachdev of Vedanta Hedging met with Henderson Signs and Labour Leader Ed Miliband about interest rate swap mis-selling.
As we have been arguing since the findings were released last Friday, this initial report falls well short of the kind of redress that many SMEs need and deserve if they have been mis-sold hedging products.
Mr Sachdev helped Henderson Signs & Ed Miliband to understand the complex product they have, and also why this may not lead to full redress by the Bank if they just relied on this FSA process.
A compensation scheme for victims of bank mis-selling should be extended, Ed Miliband said after visiting a family firm badly affected by the scandal.
The Labour leader demanded action from the Financial Services Authority (FSA) after being told some who lost huge sums may not end up getting any redress.
Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group have agreed to pay compensation to customers who were mis-sold interest-rate hedging products.
Some 28,000 of the complex products have been sold since 2001 – often as a protection against a rise in interest rates – without the customer fully grasping the risks.
Among them was Henderson Signs, a small family business in south-west London, which signed up in February 2008 as part of a £30,000 loan deal to improve a property. Soon afterwards, the financial crisis saw interest rates plunge – exposing the Hendersons to costs that could rise as high as £1 million.
“It’s crucified us,” 73-year-old boss Alan Henderson told the Opposition leader in Putney. “We’ve gone backwards and backwards. Staff redundancies. We’ve not been able to renew any of our vehicles or get new equipment. You go to the doctor for help and what you get is an injection of cancer. That’s what this has done to us.”
After nearly 40 years of very satisfactory banking with NatWest, he said, it had come as a particular shock to be treated in the way they were. They were “bullied” for payments and had five different “relationship managers” in four years – in sharp contrast to decades of dealing directly with a local manager.
The Hendersons said they believed they were within all the criteria set down by the FSA and the ombudsman to qualify for redress for the loses they suffered. But an expert (Vedanta Hedging) suggested that as the type of product they were sold was not classified in the highest priority section despite being equally or more complex, they could miss out.
Mr Miliband said that would be unacceptable. “We have got to have redress for you. We can’t just have it for limited products. This has made me realise that you’ve got to make it much wider. I will be demanding that the FSA widen its scope. We can’t have a situation where people who have so clearly been fleeced in the most reprehensible way … are excluded.”
Joking after the detail of the product was set out to him, Mr Miliband said: “It shows how ridiculous it is that you were sold this. I’ve got a Masters in economics and I’m finding it hard to get my head round it.”