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An Open Letter To Professional Advisers

» Posted on: 7 August 2012

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Mis-sold Interest Rate Swaps

Do you have clients suffering under the weight of swaps or collars? Taylors has a specialist unit to support SME clients wishing to mount claims against the banks which mis-sold interest rate swaps, collars and structured collars (the “Swaps”).

The FSA recently brought this issue into focus. Businesses of all sizes are suffering as a result of Swap deals. The Swaps are sophisticated derivative products, but many SMEs entered into them without advice. While interest rate caps can be useful products in uncertain times, many Swaps that were inappropriate to the needs of individual businesses have been sold.

Some banks encouraged customers to believe that interest rates would go up, as in previous recessions. In fact the banks' internal predictions suggested that interest rates would come down. Others forced customers into Swap deals by imposing a condition on their loan offers. The Swaps have left many SMEs locked into paying an artificially high rate of interest, unable to benefit from the dramatic fall in base rates and facing huge exit fees if they want to get out of the Swap.

Few cases have come to Court so far but most have been settled on confidential terms, demonstrating that the banks are anxious to avoid a flood of litigation similar to PPI claims. Following the probe by the FSA, eleven banks have joined the regulator's 'redress' scheme. This scheme is intended to force the banks to review their sales of Swaps and compensate customers to whom they have been mis-sold. Our view is that clients should protect their position by taking independent advice and pursuing potential claims, rather than relying on the banks' own judgment of what constitutes mis-selling.

Taylors are different from other commercial law firms in that we do not have any allegiances to the banks. We are on no "bank panels" and do not rely on the banks for work or introductions. If you have SME clients who have entered into a Swap deal, we can help. Please contact me at tony.catterall@taylors.co.uk or call 0844 8000 263.

Tony Catterall

Copyright 2006 - 2012 Taylors Solicitors

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