Mis-selling of Interest Rate Swaps

The banks caused the financial crisis and the government seem incapable of bringing the country out of the crisis. The mis-selling of Interest Rate Swaps and subsequent litigation which is now becoming prevalent may well be the catalyst to bring the country out of recession…..

It is well known that the international financial crisis which has been blamed for much of our woes since 2008 was caused by the reckless actions of banks worldwide. Our government has been attempting to bring the country out of recession since this time but to no avail. Despite bailing out two of the country’s largest banks and despite the billions that have been pumped into the economy through quantitative easing, the country does not seem to be clawing its way out of the recession. In fact, PWC made an announcement to their clients that they do not expect the country to claw its way out until 2020.

The problem continues to be the banks and their refusal to lend money to small and medium sized businesses. This in turn means that businesses are not in a position to hire staff and the trickle down means that there is simply no money to spend on the high street. It is widely acknowledged that if the banks were to start to lend to small businesses on a larger scale, that this in turn will reverse the fortunes of a country as a whole.

Why are the banks refusing to lend? Simply put, the refusal is a result of the banks previous negligent lending and their now reluctance to lend to businesses that do not satisfy the now strict conditions that the banks have put upon companies before they will lend them money. It is this new spirit of responsible lending that is, without malice, lending itself to the country’s inability to rise from the ashes of the international financial crisis.

How will Interest Rate Swap litigation help??? The mis-selling of Interest Rate Swaps affected has seriously affected small and medium sized businesses since August 2008. The same companies who are now being refused finance by the banks as a result of the banks responsible lending, are those businesses who may be due thousands of pounds in refunds and consequential losses from the banks.

Instead of having to lend money to small business, the banks may well find themselves having to refund large sums of money. A small business that was mis-sold an Interest Rate Swap may be able to claim against the bank for all payments made on the Swap to the bank and other consequential losses stemming from the mis-selling of the product.

Interest Rate Swaps are technical derivative products which should not have been sold by the banks to retail customers. A Swap may have been mis-sold for a number of reasons, including the breach of the FSA rules. The banks have agreed with the FSA to roll out redress to customers. However, the proposed system is likely to only offer redress to very few of the bank customers who entered into these agreements.

Qualified solicitors will be able to properly advise bank customers as to whether they have a claim and also the value of the losses to date. The involvement of a lawyer in these cases will not only ensure that cases are looked upon in a fair and impartial manner by the banks but will also ensure that customers receive the value of compensation that they are entitled to.

How will money received by bank customers as a result of Swap cases help the economy? Customers that were mis-sold Swaps can expect to receive up to millions of pounds in compensation from the banks. Even a small Swap may result in a figure of £100,000 compensation. It is likely that compensation will be used by small businesses to reinvest in their businesses. The trickle down of that will mean that new staff will be hired which will in turn put money into people’s pockets. This money will not be a loan, but will in fact be money that the business will be free to use as it sees fit, and will be money on which no charges will be due.

The influx of money as a result of litigation arising out of the mis-selling of Interest Rate Swaps by the banks will have a positive impact on small business and on the economy as a whole.

Interest Rate Swap litigation is not simple and it is unlikely that the claims will be dealt with in the same way that the banks have dealt with the mis-selling of payment protection insurance. However, whether it be by way of litigation or whether a claim system is introduced, the influx of money into small and medium size businesses can only have a positive effect on the economy.

Do not wait for the banks to come to you. If you have been sold an Interest Rate Swap, contact a solicitor who will be able to advise and assist your business in the refund of payments made servicing the Swap and also any consequential losses.

Benjamin Posener is a Solicitor-Advocate and a partner at FPG Solicitors.

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