What should you do if you have been mis-sold an interest-rate hedging product, such as an interest-rate swap?
What is interest-rate swap mis-selling?
In about 2005, high-street banks and financial institutions started selling highly complex financial instruments called interest-rate swaps to thousands of individuals and small businesses seeking loans. The banks often told customers they needed the swap arrangement to protect themselves from the risk that interest rates would increase, potentially making their loan repayments too high to cope with. The banks often presented the swap as a form of fixed-rate loan, whereas in reality the swap was a complex bet on the movement of interest rates and carried very substantial risks. Many customers were sold or forced into a very expensive dud under which they were worse off but from which the bank made huge profits.
These and other more complicated interest-rate hedging products were usually sold without a full explaination of the risks involved. Many customers simply did not understand what they were signing up to. The risks included that interest rates would fall (as they in fact did) and that the customer would be charged an enormous fee to break the agreement early. The bank, however, would often have a clause allowing them to break the agreement early if the swap started to work against them. In many cases the interest-rate swaps simply weren’t a suitable product to be selling to small businesses, and some companies lost hundreds of thousands of pounds.
How can we help those affected by interest-rate swap mis-selling and other hedging products?
We can advise you on the strength of a claim for compensation and pursue compensation for you through negotiations with the bank, via a complaint to the Financial Ombudsman Service, or if necessary through litigation. If a compensation claim is not viable, we can assist you by trying to negotiate a cheaper exit from the swap.
How much will it cost to pursue an interest-rate swap mis-selling claim?
We will assess the merits of your claim for a fixed fee with a view to continuing on a full Conditional Fee Agreement (CFA; a 'no win no fee' agreement) if the case has reasonable prospects of success. We hope to offer full CFAs in a substantial proportion of cases we assess. The fixed fee excludes disbursement expenses we pay on your behalf such as court fees and any barrister's fees, unless the barrister is willing to advise on a no win no fee basis.
Depending on the strength of your case we may continue with the full CFA. If you want to go on but the case is more risky we may suggest a partial CFA (under which you pay reduced fees if you lose but the full fees if you win) or a normal hourly fee agreement where you pay our normal costs whether you win or lose. Whichever applies if you win, most or all of our fees should be recoverable from the defendant.
In addition to our fees and expenses you will also need to consider the risk of losing the litigation and having to pay the defendant’s costs. We will assist you in obtaining ATE insurance to protect you against that risk. If your case has good prospects of success you should be able to obtain ATE insurance. In some cases we may be able to secure ATE that will also cover you for the expenses we incur on your behalf.
If we are unable to offer a full 'no win no fee' agreement, some cases may be suitable for funding by a third party litigation funder, but they will take a proportion of your damages as a condition of providing the funding.
We will advise you fully on the cost and funding options that most suit you and your case.
Media coverage of interest-rate swap mis-selling
There has been a lot of media coverage of interest-rate swap mis-selling recently, and a number of parliamentarians have been calling for an inquiry by the regulators. Some examples of the coverage on Interest rate swap mis-selling is below:
If you would like to speak to a solicitor about interest-rate swap mis-selling, please fill in our online registration form here.