Swaps and Financial Mis-selling

Over the course of the past few years, there has been considerable controversy over the financial mis-selling at UK banks.

Many small and medium-sized businesses were sold interest rate swaps, caps and collars and other derivative products. Financial institutions stood to make significant amounts of money from the sale of these products and persuaded a large number of companies to enter into these arrangements.

Often the product was sold by a bank as a condition of granting a loan to a SME and staff have subsequently faced criticism for not advising businesses about the risks involved.

Interest rate swaps

Arguably the most high-profile mis-selling scandal involved interest rate swap agreements (IRSA), often referred to simply as swaps.

These products were widely sold over a period of several years and the arrangements have had a devastating effect on large numbers of SMEs. In the worst cases the financial hardship that has resulted has seen businesses close down altogether.

At the heart of the problem is that the products were sold as protection against high interest rates, with no explanation of the consequences if interest rates remained low.

Financial institutions have also been accused of not doing enough to outline the relationship between the loan and the swap, or failing to properly inform businesses about the exit charges.

Making a claim

It is estimated by the Financial Conduct Authority [FCA] that 28,000 swap agreements were mis-sold to UK businesses by the ‘Big Four’ banks. This has opened the floodgates to litigation and some predict that the banks could eventually end up paying around £4.5billion in refunds and compensation.

Depending on the circumstances in which your business was mis-sold a product, there may be several courses of action available. A bank which misled your business or failed to make you properly aware about the details of the arrangement you were entering into could be liable for a statutory claim, a breach of duty of care or misrepresentation.

The situation surrounding older products (those sold over six years ago) can be complicated by the fact that banks will argue that the window for taking legal action has elapsed. While this argument may be challenged, seeking legal advice as soon as possible can increase the likelihood of your claim succeeding.

Our experienced team of solicitors can advise businesses which have been mis-sold products by financial institutions about the various options open to them and will work to achieve the best possible outcome.