Contact us on

020 7611 4848

email us


Arrange a Callback

Ask a Question

Making Interest Rate Swap Claims

Monday, 3 December 2012

The latest scandal to engulf the banks is the mis-selling of Interest Rate Swaps or Base Rate Swaps to small businesses. Affected businesses may be entitled to a refund of premiums, a refund of exit fees and substantial damages.

What is the Issue?
The FSA has found that several major banks were mis-selling complex derivatives to small and medium sized businesses. There are strict rules about the sale of these products and a Code of Conduct that banks have breached.

The FSA concluded that small businesses often did not fully understand the products or the associated risks. Also, the banks failed to explain how the products worked and failed to ensure that their customers understood the risks. In many cases it was not clear that the businesses actually needed the products.

What are the Consequences?
Many of the swaps were designed to protect against a rise in interest rates and sold as a type of insurance. If rates rose, the counterparty would pay the difference between the fixed rate agreed in the contract and the higher market rate. In effect they turned a variable interest rate into a fixed rate.

However, the structure of the products meant that when market interest rates fell as recession hit, businesses paid lower interest rates on their loan agreements but had to pay out the difference on the swap contract. They were effectively tied in at higher rates and the swaps ended up costing them.

As a consequence, many businesses went bust, faced crippling payments on the swaps or were forced to pay extortionate exit fees to escape the contracts.

In response, the FSA and a number of banks have set up a compensation scheme. However, many small businesses have either gone bust already or are finding the scheme slow to respond to claims.

We have experienced lawyers who can help you fight your claim more effectively.

Who Might be Affected?
Many small and medium sized businesses have been affected by the sale of these products. The FSA estimates that up to 40,000 products were mis-sold.

Any business that took out a loan over the last 10 years might have been sold one of these products at the same time. Some banks made it a condition that borrowers to enter into a swap before approving loans.

Although the products are known generally as swaps, agreements that have been mis-sold may have been labelled:
  • Interest Rate Swaps
  • Base Rate Swaps
  • Interest Rate Caps
  • Interest Rate Collars

Any business that took out a loan and entered into an insurance-type product based on swaps may be able to claim compensation.

Not all businesses will be eligible for compensation but if you think you might have been mis-sold interest rate products and would like advice; Rollingsons has experienced lawyers who can assist you. For more information please contact James Crighton on 0207 611 4848.