Yorkshire Bank is fined over loan

A LAKE District hotel firm is to report Yorkshire Bank to the Financial Services Authority over the mis-selling of a complex interest-rate product.

Preston County Court heard that the case centred on a £1.2m loan taken out by Lakeside Inns to buy the Damson Dene hotel in Crosthwaite, Cumbria.

Yorkshire Bank sold Lakeside a hedging product aimed at capping the interest which would have to be paid on the loan at 8% with a lower limit of 4.6%.

But Lakeside said it was not made aware that the product involved a 'rebound' effect where the maximum rate applied if the minimum rate was breached.

Lakeside director Jonathan Denby said: 'I believed [the hedging] was cost-free and risk-free. The possible costs hadn't been explained to us by the bank.'

He argued in court that he was not made aware of how the instrument worked and therefore the product had been mis-sold.

Lakeside was awarded £223,823 in lost interest plus costs - in the region of £250,000 - after its two-year legal battle.

Yorkshire Bank said: 'We continue to believe both the bank and its staff acted correctly throughout.'