Many hard working, decent, dedicated individuals have faced financial ruin, stress and ill-health as a result of the consequences of the mis-selling of interest swap loans.
Interest rate swap loans were designed to provide protection for small to medium size businesses (SMEs) against future interest rate rises but were inappropriate for large numbers of customers, many of whom would not have been granted the loan without entering into a complex structured deal, often for a very lengthy period.
The FSA (The Financial Services Authority) has looked into the mis-selling of business interest swaps and considered that there may be a claim for compensation. The FSA provided a review of the interest swap loans sold to SMEs by the four largest banks in the UK; HSBC, Barclays, Lloyds TSB and RBS.
Interest rate swap loans are complex products, which banks mis-sold to businesses alongside loans to protect them against rises in interest rates, in anticipation of interest rates going up. However, these interest rate swap loans have caused severe problems for businesses when interest rates subsequently went down, and the FSA believes that banks did not do an adequate job of warning customers about the risks of Interest Rate Swap loans in the event of interest rates dropping. It was also discovered that in some cases borrowers had been pressurised to sign up or told that the interest swaps were obligatory or made them more likely to succeed in their applications.
The FSA have found evidence of a number of poor sales practices across a number of products. These practices vary across banks and include:
- Poor disclosure of exit costs;
- Failure to ascertain the customers’ understanding of risk;
- Non advised sales straying into advice
- ‘Over-hedging’ (i.e. where the amounts and/or duration did not match the underlying loans); and
- Rewards and incentives being a driver of these practices
The ‘protection’ against rising interest rates these products provided came with a price: businesses had to pay more if interest rates fell. And after rates were slashed in 2008, many businesses found themselves worse off instead of better.
Many businesses have also found to their peril that once locked in to these costly agreements, many were unable to escape, as exit costs – which in some cases reached £1m – would be enough to bankrupt them. It has been found that one company went out of business after being charged interest amounting to more than twice the original loan amount – a £3m loan racked up an extra £6.1m to pay back.
We are authorised and regulated by the Solicitors Regulation Authority and we possess an excellent track record in recovering compensation in many legal issues from contract disputes to financial mis-selling of insurance products and services. For more information please visit our website www.iamhappi.com or Contact Us for further advice on interest rate swap claims.
If you are a small to medium size business that has been mis-sold a business loan with swap interest rate product please do not hesitate to CONTACT US to see if you have a claim for compensation.