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 Financial Services Authority(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 (The Financial Services Authority) found a range of poor sales practices including; poor disclosure of exit costs, failing to ascertain the customers’ understanding of risk and “over-hedging” where the swap is larger than the loan. It was also found that sale staff were incentivised to sell more complex products. Thus, due to these poor sales practices, the banks have forced these complex products onto Small & Medium Enterprises (SMEs) and individuals (the “unsophisticated client”) that has led to the mis-selling scandal. For further information on these interest rate swap loans please contact us for free initial advice.
Many SMEs are now facing huge payments under these agreements which they must continue to pay for the full term of the Swaps despite the substantial changes in the economic climate. Products sold as ‘protection’ are now crippling businesses who now seek to exit the arrangements and discover that significant exit or cancellation fees are payable, these can be up to 50% of the initial loan.
The top four UK banks that have mis-sold interest rate swap loans to small businesses since 2001 areHSBC, Barclays, Lloyds TSB and RBS.
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
