Mis-sold Interest rate protection (Swaps)

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Have you been the victim of Banks mis-selling interest rate protection?

According to the latest news: UK high street banks may have been deliberately mis-selling interest rate protection.

Certain Banks sold this interest rate protection product as a risk management solution to help protect businesses against adverse fluctuations in interest rates; known as ‘swap’ loan repayments (but may have also been used with capped, collared or other structured products).

The product was sold as a hedge against an interest rate rise as the Bank would cover the additional interest payable. However, the agreement contained a clause which required the customer to pay a fee to the Bank if interest rates fell. It is reported that clients were not fully informed of the risks involved if interest rates were to fall, and also of the exit fees.

The swap loan product was generally only pitched at the (financially sophisticated) borrower with a loan in excess of £250,000 or a borrower with a portfolio of properties with an aggregate loan in excess of £500,000.

A recent Bank customer received an penalty of £95,000 due to him missing two payments and allegedly 'breaking the agreement'. The customer had to sell one of his properties to pay the fee and is now taking legal action against the bank. The same client also stated that the interest rate protection product was only taken as the bank told him it was a condition of the loan.

The Financial Services Authority (FSA) has said it considers ‘swaps’ so complicated they should only be sold to investment professionals.

If you believe that you may have been disadvantaged by the mis-selling of this product, get in touch.