Interest swap rates is a “gamble” by the bank and the business owner on whether the business loan interest rate will rise or fall. Whilst selling these loans, banks paid more attention to the possibility of rates rising and not if they were to fall for any extended period. Over the last few years the interest rate has fallen to historic lows, meaning that businesses and individuals who bought these products (or arguably forced into buying these products), are facing crippling monthly repayments and massive costs to get themselves out of the loans.

It must be remembered that the majority of business owners mis-sold business interest rate swap loans had no idea that is was a speculative loan, a gamble. The swap loan was sold on the basis that it was simply a fixed loan, like a fixed mortgage.

Interest rate swaps allow hedging loans as a separate entity to the underlying asset based loan, and therefore, are paid on top of the existing loan.

The banking industry failed to advise the small business owner ot the risk and pitfall 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 onerous “get out clause” if the interest rate fluctuation did not suit them. In one case reported in The Sunday Telegraph, a 5 year, £5 million swap loan would cost the small business owner the sum of £4.1 million to terminate the business loan early.

The FSA (The Financial Services Authority) has looked into the mis-selling ofbusiness interest swaps and considered that there ay be a claim for compensation. The FSA provided a review of the interest swap loans sold to small to medium size businesses by the four largest banks in the UK; HSBC, Barclays, Lloyds TSB and RBS.

Simply put

  • Around 28,000 swap products have been mis-sold by the banks.
  • The products have poor disclosure of any exit costs.
  • Customers were not made fully aware of the risks they were taking on with the loans.
  • The sales staff giving professional advice were not regulated or qualified to do so.
  • Loans were “over-hedged”, where the amounts and or duration did not match the underlying loan.
  • Rewards and incentives were given to staff for selling the loans.

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 or Contact Us for further advice on interest rate swap claims. You could be owed £thousands!

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