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 interest rate rises, the bank pays the difference, but if the interest 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 business swap loans. The 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:-

Barclays Bank mis-sold business interest rate swap loans

RBS Bank mis-sold business interest rate swap loans

Lloyds mis-sold business interest rate swap loans

HSBC mis-sold business interest rate swap loans

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 interest rates to provide some future certainty that the cost of the loan will not rise. In reality, the swap interest business loans were a sophisticated banking product that gambled on interest rates rising and falling.

The swap interest rate product may be sufficient for the “informed” or “knowledgeable” business owner willing to take a risk, but not for most retail small 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 the 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 web site on this alleged mis-sold interest rate business swap loan technique was that they banking advisor informed the business consumer that without the swap loan, they were unlikely to be accepted by the bank. A compulsory 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.

Further Reading

Bank Mis-selling claims

Swap Loans

How Swaps are Sold

Swap Loans In The News

Caravan Park Swap Loans

IRSA business loan insurance mis-selling

Business Swap Loans

Swap Loans, No Win, No Fee

Swap Loans Blog

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