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.
According to the Telegraph, Farm owners are the latest group to emerge as apparent victims of the alleged mis-selling of the complex derivate products that produced large profits for high street banks but left thousands of small companies out of pocket.
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. Unfortunately, a substantial amount of farm owners have become victims of this scandal.
The Financial Services Authority(FSA) has found that there were “serious failings” in the sale of Interest rate swaps, and most of these products were mis-sold to farm owners between 2005 and 2008 but investigations can take place as far back as 2001.
There has been approximately 200,000 interest rate swaps sold to small and medium-sized businesses (SMEs) in the UK over the last five to ten years and it has recently become apparent that the farming industry has been significantly affected. Many farm owners may have entered into an interest rate swap or hedge without being aware of it.
Many hard working, decent and dedicated farm owners have faced financial ruin, stress and ill-health as a result of the consequences of the mis-selling of interest swap loans. Some farm owners are struggling to pay the swap payments every month in addition to their loan repayments but because of the exit fees, they are unable to sell their farms or properties.
If you are a farm owner who believes they have 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.