Commerce Commission has 'sufficient concerns' about interest rate swap products sold by banks to farmers, but wants information from more people

The Commerce Commission says it has "sufficient concerns" about interest rate swap products sold to farmers by banks but needs more people who bought the products to come forward to give it a broader picture of the issues.

In a statement Commerce Commission Chairman Mark Berry says the consumer watchdog has information from about 60 complainants, but will need information from more people if it's to form a complete picture.

"We are not only interested in people who feel that they have been misled but also those who are satisfied with the way the product was sold to them," says Berry.

"The Commission is inviting affected farmers and others who may have been involved with swaps to read information on the Commission’s website and complete a questionnaire at www.comcom.govt.nz/interest-rate-swaps."

The interest rate swaps at the centre of the issue are a financial derivative product that allows a client to manage their interest rate exposure on their borrowing. Although primarily sold to big corporate and institutional customers, they were also offered to rural and commercial clients by some banks.

"In particular complainants allege that the nature and characteristics of the swaps were promoted in a way that was misleading," Berry says. "The Commission has been assessing this information and has requested and received preliminary information from the banks and more detailed information is being sought."

“This is a very complex investigation and we are at an early stage. We have not yet formed a view as to whether the Fair Trading Act has been breached, however we do have sufficient concerns that we wish to probe further."

He also notes many farmers claim to have suffered significant financial loss as a result of entering into the interest rate swaps.

Asked by interest.co.nz to name the banks involved in its investigation a Commerce Commission spokeswoman said: "As a responsible agency we would prefer not to name the banks currently under review as further examination of the evidence may result in one or more of the banks being removed from the investigation. The Commission may also decide to take no further action into any of the allegations."

Under the Fair Trading Act businesses found guilty of breaching the Act may be fined up to NZ$200,000 for each charge. Where more than one charge is laid, the court may impose a fine greater than NZ$200,000. Only the courts can decide if a representation has breached the Fair Trading Act.

In August last year the Commission began probing whether interest rate swaps were misleadingly marketed from 2005 onwards.