Interest Rate Swap Claims – Ask Me Anything

Hi Daniel,

That was a brilliant explanation thank you.

What I didn't understand was that the Loan and the Hedge rate are effectively different contracts and you can pay the loan down or off and still be locked in.

Having done regulated mortgage sales years ago, and knowing how much proof must go into showing a customer knows what they are getting into I can't believe this was allowed to happen and even worse pushed by the Banks purely as a way to make money from their customers and not for their customers.

I am appalled and even more than ever wish you and your clients good luck.

@Neil

Thanks Neil, if you have any more questions feel free to ask away

Answers to popular questions from people who have completed the enquiry forms

Why are businesses not coming forward to claim redress on mis-sold Interest Rate Hedging Products?

I have been working at the forefront of the industry since the start and I have helped hundreds of businesses from SME’s to large Corporates start the claims process to get redress on mis-sold Interest Rate Swaps. The issue has been raised in parliament and has been heavily featured in the press but still the numbers that are coming forward compared to the predicted numbers mis-sold is way out of proportion. It is estimated that 40,000 businesses have been mis-sold interest rate swaps and other types of hedging products but only a fraction of that number have come forward to claim redress from the banks.

So what’s stopping them?

Upsetting the relationship with the bank
One of the biggest reasons for people not coming forward is that they do not want to upset the bank. Many businesses are reliant on the banks and are scared that overdrafts will be called and future financing will be rejected. The FCA has stated quite clearly that banks should not treat business any differently if they have submitted a claim and has instructed the banks to not change any financial arrangements during the review process that could harm the business. With the banks reputations being tarnished so much already another scandal of unfair treatment is something they do not want.

Worried that claiming is expensive

A lot of businesses are afraid that starting a claim is expensive. This is sometimes the case when using some firms. Be sure to use an actual true expert in the area. The bulk of Seneca Banking Consultants fees are on a contingency basis, a no-win no-fee basis, and will therefore only become payable when awarded redress.

Don’t know if you have a swap?

From talking to hundreds of clients I have picked up on the fact that many of them didn’t know they had an interest rate hedging product, most people just sign paper work and don’t fully understand what they are signing, and as I mentioned earlier some banks wouldn’t agree to the new loan unless you took out an interest rate hedging product so people felt forced into quickly signing paperwork they hadn’t fully read and digested. What you can do is just send your documents into Seneca Banking Consultants and we can offer a free initial consultation.

Claiming is time consuming.

Claiming redress for a mis-sold interest rate swap or other hedging product isn’t as time consuming as you think if you use an expert. Choosing the right company to help you claim is crucial. Using a company that is not fully up to scratch on the products could cost you more time, effort and money. A true expert firm will take your paperwork and do the work for you, updating you as your case progresses.

The Banks are sorting out the issue

The banks are looking into cases under the review of interest rate hedging products but this is going nowhere fast. Many business are suffering huge financial implications as a result of mis-selling and need the matter looking into now. Some banks are prioritising some of the more rare interest rate hedging products but what about the most common products like interest rate swaps? A lot of the larger firms have cash flow that can ease the burden put on them by the interest rate hedging payments but smaller firms need to see results before it’s too late. Using Seneca Banking Consultants today could assist you in freezing payments on the product which hopefully can make a difference.

Embarrassed about the mess

Another reason why businesses are not coming forward is that they may be embarrassed about the mess the Banks have got them into. Remember this product was meant to protect your business. You did what you thought was right for your business and staff; it is the banks that mis-sold the product to you.

Hi,

I'm looking to take my bank to court.
I've complained to my bank and am awaiting final offer as not interested in product substitution.

they have just agreed to suspend my repayments pending review.

i have made 600k in IRH payments.
I've borrowed over £400,000 from family to survive .
would it be possible to claim for the 600k plus s 400k that family have supported me with.

without family support i would have gone into administration.
what are the realistic amounts that could be reclaimed?

David Hands

@David Hands

“The calculations of both direct losses (i.e additional interest payments made to the Bank and potential break costs) and consequential losses (i.e loss of opportunity, cost of additional finance) can be complex and highly fact sensitive. We would be more than happy to have an initial conversation with you and provide some guidance. Please feel free to contact us. Just fill in the contact sheet at the top of the page and we will give you a quick call.

does that help David?

interest rate swap agreements (IRSA’s) and interest rate hedging products (IRHP’s) were potentially sold alongside any loan, debt or mortgage facility. It is possible that an IRSA or IRHP was sold alongside a buy to let (BTL) mortgage regardless of whether the client is a company, small business owner or individual.

IF you have been asked to enter into an interest related product in addition to the BTL mortgage this is likely to be an IRSA or IRHP. With some Banks however they have built the IRSA/IRHP into the loan itself, these are often called Tailored Business Loans (TBL’s)

What do you think of this article? please comment and ask questions relating to your own circumstances

Firms as small as bed and breakfasts and takeaway shops were left with major bills after buying the complex financial products linked to interest rates without fully grasping the risks - and as many as 40,000 could now launch claims.
One case highlighted by Financial Mail on Sunday involved Colin Aldous and his wife Julie, who run Ufford Park golf and spa hotel in Suffolk, a £5million-turnover business employing about 200 staff.
So far they have paid £750,000 in interest, but when they tried to get out of the contract they were told it would cost £450,000.
HOW INTEREST RATE SWAPS WORK
The phrase ‘interest rate swaps’ is often used as shorthand for several products used by firms with outstanding bank loans to cut their exposure to rising interest rates.
Different types include swaps, collars and structured collars.
A customer who purchases a swap buys a contract that pays them money if interest rates go up from a fixed point. This will offset the higher costs on their loan. Conversely, if rates go down, they will be required to pay money to the bank, but that will be offset by the lower interest rate on their loan. The overall effect should be effectively to fix the interest rate for the customer.
However, it was never envisaged that interest rates would fall to the historic lows seen in the wake of the banking crisis, and this has caused buyers to face unexpected costs.
The other products causing most problems are structured collars. A collar, as its name suggests, is a product that limits the range within which the interest rate on a loan can move.
But structured collars add complex terms and conditions that can mean if rates fall to an extreme low as they did in 2008 and after, the customers actually face higher costs.
Another case involved Mike Lloyd and Rodney Hall, who set up pub chain Sarumdale in 1991. By 2006 they operated 23 outlets across London and the South East and employed 240 staff.
But Sarumdale found itself paying more than £300,000 a year in interest as well as a further £400,000 for capital repayments, and ended up in administration.
The banking industry now faces another hefty compensation bill after a long list of scandals, including the widespread mis-selling of payment protection insurance and the Libor interest rate-rigging debacle.
High Street banks also stand accused of gambling the hard earned savings of customers by failing to stick to rules for financial advice following a secret investigation by the FSA published yesterday.
It is believed 40,000 interest rate swaps could have been mis-sold to small businesses since the end of 2001 after the FSA highlighted 'serious failings' in the sale of the products last summer.
Barclays revealed earlier this month it was upping its swap mis-selling provisions to £850million and said it sold around 4,000 interest rate swaps to small businesses of which around 3,000 were likely to be liable to potential mis-selling claims.
RBS has already set aside £50million, but said late last month this would be 'meaningfully' increased after the FSA's recent guidance on how to review cases.
Santander UK also said it uncovered a raft of former Alliance & Leicester small business customers that were potentially mis-sold interest rate swaps and has put by £232million to cover costs, including compensation for mis-selling of interest rate swaps.
The British Bankers' Association said: 'The FSA's recent announcement gives clarity to businesses and is enabling the banks to put in place the steps needed to resolve each case for customers.
The BBA added: 'Banks will be contacting those companies affected shortly, prioritising those with the greatest need.
'Any business which is currently facing financial distress and is seeking a suspension of payments should get in touch with their bank immediately.'
Interest rate swaps are complicated derivatives that might have been sold as protection - or to act as a hedge - against a rise in interest rates without the customer fully understanding the downside risks.
They were marketed as low-cost protection against rising interest rates, often as a condition of a business loan.

if the banks are dragging their feet so badly reviewing Interest Rate Mis-Selling cases in the FCA scheme how can they be trusted to reach a fair deal for SME's?

is it true the banks teams have been role playing for months with professional advisors before they go into the interest rate swap review meetings with their customers, yet they are advising customers not to take independant advice - if so what are the FCA doing about it?

We have been advised to avoid the circus of the face to face review meeting. In the case of the bank that we are working with, I have been advised that they are run by the case handler who doesnt run the meeting so as to ensure that the correct questions are asked. Apparently the indipendent reviewer who is present is not the person reviewing your case either.

I was at the Bully Banks conference last Sunday and there were some stories of very long and arduous meetings, one person hade been grilled for 6 hours.

Barclays seem to be using Eversheds to do their meetings.

disothey have proved disorgan