Following the Central Bank of Ireland´s naming of six Irish banks over the PPI insurance scandal, speculation has increased that businesses may soon be able to make IRSA mis-selling claims in Ireland.
At the beginning of October, the Central Bank of Ireland (CBI) named and shamed six of Ireland´s leading high street banks over the mis-selling of payment protection insurance (PPI) policies on loans, credit cards and overdraft facilities; opening the doors for ordinary citizens in Ireland to make PPI insurance claims for compensation.
However, inasmuch as the mis-selling of PPI insurance is one of the biggest banking scandals of our time, a much larger financial headache could be facing Ireland´s banking industry should the CBI acknowledge that there has been widespread mis-selling of complex Interest Rate Swap Agreements (IRSAs) to small and medium sized Irish businesses.
In the UK, the Financial Services Authority have already identified eleven British banks who knowingly mis-sold more than 40,000 of these policies to business customers on the premise that it would protect the businesses from financial exposure if interest rates on loans the businesses had taken out with the banks began to rise.
The policies were mostly sold between 2005 and 2008, at a time when bank interest rates were at their lowest since 1955. However, since then, bank interest rates have fallen even further – leaving thousands of UK businesses tied into loan agreements which have cost them billions of pounds in interest payments.
Although the offending banks have been told to conduct a “redress exercise and past business review”, many of the banks have appointed their own “independent reviewers” to oversee the refund of mis-sold IRSAs, and business owners are being advised to seek professional legal advice to ensure they receive a fair share of compensation for mis-sold interest rate swaps.
In Ireland, there is already a precedent for business owners to recover compensation for the mis-selling of insurance on bank loans. In July, Dublin property developer David Agar pursued a case against the Ulster Bank over the mis-selling of IRSAs, eventually forcing the bank to write off millions of Euros after his mis-sold loan insurance claim was successful.
Mr Agar´s case, the Financial Services Authority investigation in the UK and the CBI´s action against the banks found guilty of fraudulently selling payment protection policies could all be the foundation for small and medium sized business owners to make IRSA mis-selling claims in Ireland.