The mis-selling of business interest rate loans (business swap loans) is another scandal by the banks. Simply put, a business swap loan is a “gamble” by the bank and the business owner on whether the business loan 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 historice 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”, “caravan and leisure parks” and to “small hotels”.
The top four UK banks that have mis-sold business swap loans to small businesses since 2001 are hereunder:-
Barclays Bank mis-sold business interest rate swap loans
Most of these business swap loans were sold between 2005 and 2008 but investigations can take place as far back as 2001. Most small to medium size business owners were led to believe that these types of business swap 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, business swap loans were sophisticated banking product that gambled on interest rates rising and falling.
Business swap loans may be sufficient for the “informed” or “knowledgable” business owner willing to take a risk, but not for most retail small business owners (the non-sophisitcated” customer). As a result of the banking crisis where interest rates have plummeted, these types of business swap 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, also failed to advise the business owner of the onerous penalty clauses for cancelling 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, another alledged mis-sold interest rate business swap loan technique was that the 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 technical in nature sold to “unsophisticated” small business owners.
The FSA (The Financial Services Authority) has looked into the mis-selling of business interest rate swaps and considered that there may be a claim for compensation. 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 hestiate to Contact Us to see if you have a claim for compensation.