Insurance policies: Another mis-selling scandal?

The "the truth must be told" about the mis-selling of complicated insurance policies to thousands of businesses across the country - the words of an influential group of MPs urging action over so-called "interest rate swaps" that many companies complain they were forced into signing up to.

Today we met Andrew Candy, a businessman whose picture of his future was a thriving gallery. Now he's stuck paying for a swap he took on with a mortgage from his bank, and that vision could disappear forever.

In simple terms he can't afford the payments. He's selling his house so he can pay himself a wage rather than take any cash out of his business. Today he and others took their case to Westminster.

Andrew Candy at his gallery Credit: ITV News

They all signed up to so called "Interest Rate Swap Agreements," which are a bit like insurance policies. They believed they were signing up to protect their business if interest rates went up.

What they say they weren't told is that the costs could soar if interest rates went to rock bottom, as they have done. And the price of getting out of the arrangement is just too high for many.

In Andrew's case, it would cost him more than £100,000 to get out of the agreement which was on an original loan of £500,000.

The chairman of the Treasury Select Committee, Andrew Tyrie, has told us he is worried "there is a pattern" and if it is proven that thousands of firms were forced into taking on these deals it would be "appalling".

The impact of the potential mis-selling Credit: ITV News

I understand that around 20,000 firms may have been sold these policies, and as many as 400 are consulting with lawyers about getting compensation.

It is hard to tell right now, as legal proceedings are just beginning, but the costs for the banks could run to £10 billion, according to those involved in cases.

The British Banking Association said:

If a business has a variable-rate loan, it inevitably has an unpredictable cost, and unpredictability can mean risk ... Swaps are a way of helping businesses manage that risk if they do not want to be tied to a fixed-rate loan.

The financial services authority has promised to act and a report is expected next month. But for some companies already in the frame, like that of Andrew Candy, even that could be too late.