Hundreds of firms are set to pursue claims against banks for mis-selling interest rate hedging products before the financial crash, in an area which could generate thousands of claims for compensation.
Newcastle-based firm TLW Solicitors, which specialises in financial mis-selling, is investigating 150 potential cases and working with insolvency professionals across the UK to identify more firms eligible for compensation.
Of those around 30 firms are actively pursuing a claim. But TLW partner Peter McKenna (pictured) said there are ‘potentially thousands of businesses out there that could be affected by this’.
He said: ‘When we are successful in making claims against the banks for these mis-sales, we have the potential to release funds for creditors owed from those businesses that have ceased trading.
‘Not only does this redress work in the interests of the creditors, these funds will be sent to the insolvency practitioners in order that the creditors of the business are paid all or some of the sums that are due. All of which is good news for businesses of all sizes.’
The claims come after banks allegedly sold companies interest rate hedging products (IRHP), without making the risks clear. The products were designed to insure against interest rate rises, but when they instead fell steadily, many businesses which were sold the products faced thousands of pounds in losses.
This contributed to the collapse of many, TLW said.
According to the firm, more than 40,000 IRHPs were sold nationally. To date £1.9bn has been paid out in redress, including £400m to deal with consequential losses.
TLW is seeking compensation from banks for losses including the loss of profit, bank charges and HM Revenue & Customs late payment penalties. It expects the claims process to be completed within nine months.