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Britain’s four largest banks have suffered another onslaught of criticism after the financial regulator said it had found evidence of them mis-selling interest-rate swaps to small and medium-sized businesses (SMEs).

Swap loans were designed to provide protection for SMEs against future interest rate rises but were inappropriate for large numbers of customers, many of whom would not have been granted the loan without entering into a complex structured deal, often for a very lengthy period.

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 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 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. Thus, it has now become apparent the bank was protected more than the customer and it was normal practice to emphasise the rewards and de-emphasise the risks. For more information, please do not hesitate to Contact Us.

Thus, there has been considerable media, regulatory and political attention given to the mis-selling of swap loans (Swap Loans – In the News). In June 2012, the FSA has recently agreed a settlement with Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland to pay “appropriate redress” to SMEs that were mis-sold swap loans. Thus in many cases the only issue now is (or should be) the question of appropriate redress for the customer.

Bank customers who consider they may have been mis-sold these financial products should seek legal advice without delay. Banks are likely to argue that mis-selling claims are time-barred 6 years after the date of the sale of the financial product which is the subject of the complaint (or possibly even earlier).

We have an excellent track record claimingcompensation against major banks and lending institutions for mis-sold insurance contracts and products. There is no conflict of interest with us or any bank. As a specialist firm of solicitors we have no fear in taking on large banking institutions, we do not have an overdraft facility or even borrow any money from any bank to run our own business. In fact we threatened to take legal action against our CREDIT card provider because they tried to stop our taking card payments from clients who were taking action against banks for mis-sold PPI.

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

How Swaps are Sold

Swap Loans In The News

Caravan Park Swap Loans

Business Swap Loans

Swap Loans Blog

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