By Nick Turner

Last updated at 12:58, Monday, 02 July 2012

Banks have hit Cumbrian businesses with “horrendous penalties” running into tens of thousands of pounds when they tried to change their banking arrangements, a leading county accountant has revealed.

Paul Dickson

Armstrong & Watson managing partner Paul Dickson spoke of his distaste for how some firms had been treated by banks as the Financial Services Authority revealed that High Street banks have been mis-selling specialist insurance to thousands of small businesses.

The FSA said it had found “serious failings” in the sale of the policies on loans known as interest rate swaps which were meant to protect businesses against rising interest rates.

Commenting on the latest scandal to hit the British banking sector, Mr Dickson said Armstrong Watson had tried to help a number of clients who had agreements with banks, unaware that they were locked into policies which carried huge penalties if they tried to exit or change the deal.

“It is has come to our attention a number of times in recent years that businesses have needed to refinance with the banks have faced significant exit penalties,” he said.

“There are horrendous penalties to come out of these policies and these can run into tens of thousands of pounds and in some cases hundreds of thousands.

“So when the business has asked to come out of these arrangements the bank has added these penalties into any arrangement as new debt.”

“My advice would be to anyone in the SME sector who has been in this situation, or feels they have been mis-sold a policy, is to sit down with their accountant and look at the cost to the business so they can put a case to the bank for redress,” he added.

The Financial Services Authority says banks mis-sold specialist insurance on loans known as interest rate swaps to thousands of small businesses.

The FSA said it had found “serious failings” in the sale of these products, which were meant to protect businesses against rising interest rates.

The FSA said it had reached agreement with four banks – Barclays, HSBC, Lloyds and RBS, over providing “redress”.

Sian Simpson, a solicitor with Burnetts dispute resolution team, said that she would advise – in the first instance – any businesses who feel they may have caught up in the mis-selling to try and negotiate a settlement with their bank.

Mrs Simpson said: “I have dealt with similar situations where people have thought they have bought one policy and found it is not what they thought. Sometime banks are prepared to accept they have made a mistake.

“Another option would be the Financial Services Authority, which in this scenario is likely to be very interested to hear about the complaint.”

Businesses should always keep any documentation when buying a policy from a bank or other supplier and if the policy had been sold over the phone then a customer is entitled to ask for a transcript of the call, she added.

First published at 11:24, Monday, 02 July 2012
Published by http://www.newsandstar.co.uk