Now, I would be the first to admit that the difference between a derivatives salesman and a 3 card Monte dealer is that one of them works in an airconditioned office, but I have to take exception to the FSA's charge that interest rate swaps or cap and collar swaps have been mis-sold. A contract is a contract, freely entered into a by willing participants, or so you would like to think. Maybe the contracts were mis-bought.
What happened was that banks salesmen offered customers the ability to protect themselves against a rise in interest rates. This would give them an advantage over their customers who didn't hedge. Instead of asking for an option premium to provide this interest rate insurance, the bank offered them a cap (limiting the most they could pay) and a collar (so that they paid something to the bank if the rate fell below the collar. In some cases the cap and collar were the same, giving an effective fixed rate of interest when the cost of the swap and the loan are taken together. The bank makes its money on the cap and collar because with the cap and collar in place it can do a bit extra of volatility trading (a bit complicated that, but don't worry).
The downside for the customer is that if interest rates fall (which they did), then the customers start paying the banks quite a lot. But their interest rate costs fall so they should end up paying about as much as they were on interest alone, or maybe a little less. The trouble is those pesky competitors who did not hedge who get the full benefit of the interest rate reduction. terminating the swap agreement would even things up, but to do that the bank needs to be paid all its discounted future profits, which is quite a lot. Better to stay in the deal.
Oh, and squeal to the FSA that the nasty man from the bank tricked you into getting out your pen and signing his application form.