The Story So Far
Interest rate swaps, also known as derivatives or hedges, is a collective term for a wide range of complex financial products which are designed to protect business owners against rising interest rates.
Given the complexity of these products, they were originally devised for trading between financial institutions and much bigger corporations, who typically had their own, highly-experienced trading team. However interest rate swaps have since been sold to small and medium businesses (SMEs).
When taking out a loan, many SMEs were given the option to “swap” their variable rate for a fixed rate. This meant that should interest rates continue to rise - as was expected at the time - the SME was able to lock into a fixed rate to benefit from lower repayments.
There is now evidence to demonstrate many SMEs were mis sold these complex financial products and could be entitled to reclaim the charges.
Interest Rate Swaps Mis Selling Made Easy
Interest rates swaps, and the manner in which they were sold, were highly complex. We have therefore created a short video to shed some much needed light and help potential victims understand if they have a claim. All board the Good Ship Swaps!
Examples of Interest Rate Swaps Mis Selling
There are various ways in which an interest rate swaps may have been mis sold:
- The lender failed to explain the disadvantages of the swap derivative
(e.g. what would happen if interest rates dropped or the expensive associated costs and exit fees)
- The swap agreement did not match the length and/or amount of the original loan
(e.g. the loan was taken over five years and the swap agreement was over 10 years)
- Clients experienced undue pressure
(e.g. lenders implied the loan application would only be accepted if the client agreed to the swap or were told the swap was a condition of the loan)
- Clients were not advised to take separate and independent financial or legal advice, nor given enough time to make an informed decision.
However, when news of LIBOR rigging scandal broke, the deception of lenders became completely transparent. Banks were fully aware that interest rates would drop yet continue to sell swaps to SME’s under the guise of a rising market.
If you are a SME who took out an interest rate swap product which you did not understand, was not fully explained to you or was forced upon you, you may be entitled to redress.
An Introduction to Interest Rate Swaps Mis-Selling
My special thanks to Nicola Godford for the courteous and helpful manner by which she conducted this matter. Also to Karen who advised in Nicola's short absense.
Mr Denning - 10/10 - Equity Release