The mis-selling of business interest rate loans (business swap loans) is another scandal by the banks. It is now accepted after investigations that these complex loans sold to small to medium size business may not be to the business advantage causing losses.
Simply, put a business interest rate swap loan is a “gamble” by the bank and the business owner on whether the business loan interest rate will rise or fall. If the interst rate lowers, the business owner pays the difference. Over the last few years the interest rate has fallen to historic lows, giving rise to substantial losses to the business owners and increase profit to the major banks who mis-sold these businesses are varied from the “Chippy”, “coffee shops” and to small hotels.
The top four UK banks that have mis-sold interest rate swap loans to small businesses since 2001 are hereunder:-
Most of the interest rate swap business loans were sold between 2005 and 2008 but investigations can take place as far back as 2001. Most small to medium size businesses owners were led to believe that these type of swap interest rate loans were just a label to simply fix their small business loan interst rates to provide some future certainity that the cost of the loan will not rise. In reality, the swap interest business loans were a sophistiated banking product that gambled on interest rates rising and falling.
The swap interest rate product may be suufficient for the “informed” or “knowledgeable” business owner willing to take a risk, but not for most small retail business owners. As a result of the banking crisis where interest rates have plummeted, these type of swap interest business loans have caused financial hardship to the small business retailer causing difficult, if not impossible, trading costs, often resulting in closure of business.
The banking industry failed to advise the small business owner of the risk and pitfalls in detail, failed also to advise the business owner of the onerous penalty clauses for cancelling the business swap loan resulting in unfair lock-ins. The bank, however, had a far less onerous “get out clause” if the interest rate fluctuation did not suit them.
As in the payment protection insurance (PPI) mis-selling, (see our dedicated website on this – www.iamhappi.com) another alleged mis-sold interest rate business swap loan technique was that their banking advisor informed the business consumer that without the swap loan, they were unlikely to be accepted by the bank. A complusory product that was very technical in nature sold to “unsophisticated” small business owners.
If you are a small to medium, size business that has been mis-sold a business loan with a swap interest rate product please do not hesitate to contact us to see if you have a claim for compensation.