IRSAs — or interest rate swap agreements — are hugely complicated products which are sold alongside business loans to help protect small businesses against rises in interest rates. Interest rate swap agreements are hedging products often used in conjunction with terms such as “collars”, “caps” and “floors”. Thousands of businesses have been mis-sold this type of financing as a way to protect them against rises in interest rates. However, with interest rates hitting rock bottom due to the financial climate, companies are now finding themselves locked into uncompetitive rates and stuck with massive monthly repayments.
The FSA (The Financial Services Authority) has looked into the mis-selling ofbusiness interest swaps and considered that there may 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.
The FSA’s review also found that when properly sold, in the right circumstances to the right customers, these products can protect customers against the risk of interest rate changes. However, when sold to ‘non-sophisticated’ customers, likely to be smaller business which wouldn’t necessarily have specific expertise and understanding in this area, some products may not have been appropriate for their needs.
Due to the banks mis-selling these business loan products, many hard working, decent, dedicated individuals have faced financial ruin, stress and ill-health as a direct result of IRSAs. Most of the interest rate swap business loans were sold between 2005 and 2008 but investigations can take place as far back as 2001. If you think you were mis-sold a business loan and want to find out further information, Contact Us.