Interest Rate SWAP Claims
Maple Leaf Financial have a specialist team of solicitors dedicated to dealing with the mis-selling of interest rate swap protection products by the banks. We are happy to review these relatively complex swap arrangements and to claim compensation for our clients where appropriate.
If you believe you have incorrectly been classified as a ‘sophisticated’ customer and have, therefore, not been eligible for interest rate swap redress. Maple Leaf Financial will review your interest rate product and we will be happy to discuss your individual concerns and requirements
Free Phone: 0800 7747624
Justifed Interest Rate Swap Claims
- discrepancies between the underlying value of the loan and the interest rate swap, with customers being sold swaps which far exceed the term of their underlying borrowing, or where the notional amount of the swap is far in excess of the actual borrowing.
- substantial discrepancy between the length of the loan facility and the length of the swap product.
- customers being forced to continue with the interest rate hedges in order to maintain their current lending facility upon renewal.
- banks failing to explain to their customers the extent of the exit or breakage costs of the swaps and failing to ensure that the derivative products offered meet the needs of the customers.
- breaches by the banks of their duty of care to customers coupled with negligent misrepresentations by the banks as to the nature or effect of the products sold.
- failure by the banks to comply under the FCA Conduct of Business.
FCA Interest Rate Swaps, fair & reasonable redress
Basic redress takes into consideration the difference between the payments made on an interest rate hedging product and the payments that a customer would have made if the regulatory requirements had not been breached. Although each case is different, there are three possible outcomes for a basic redress:
1. The customers who would not have bought an IRHP will have their IHRP cancelled and they will receive a full refund on any payments they made on their IRHP.
2. Customers who would have chosen the IRHP and those who have not suffered any losses will not receive a redress.
3. The customers who would have chosen a different product that offered protection against interest rate fluctuations will only receive redress based solely upon the difference between payments they made on the product they did not choose and the payments they would have made on a different product of their choice.
Typical Fair and Reasonable Redress Offers
The goal of every review is to place customers in the position they would have originally been in had there not been a breach of regulatory requirements. The FCA expects banks to explain to their customers how their judgments have been reached, including any facts that they relied upon whilst making their judgments. It is up to each individual reviewer to verify any calculations used by the banks to determine their redress offers.
In most cases, customers will be offered 8 percent a year in simple interest, which covers the cost of being deprived the expected interest rate return on their investments. However, fair and reasonable redress may also include:
• A cost that a customer has incurred from money that was borrowed in order to purchase a product. In these cases, evidence must be available that supports these claims.
• Any interest that has been lost as a result of a customer having less money in their bank account.
If applicable, customers can receive redress for consequential loss in addition to interest.
Consequential loss involves any loss of profits and additional costs that have been incurred as a result of IRHP products that breached regulatory requirements. The following examples of consequential loss are frequently reviewed by the FCA:
• Loss of profits – Customers who submit claims for loss of profits must provide evidence that the funds in question would have been used to generate a profit through an alternative investment. Any money that would have been invested in an investment would not be able to earn bank interest during the same time period, which keeps customers from being able to double recover their funds. If a customer is found to have lost less than 8 percent interest, then a loss of profits claim can result in a customer receiving a payment that is less than 8 percent.
• Bank charges – Any fees and charges that were suffered as a result of a mis-sold IRHP investment may be recovered.
• Legal expenses – Certain legal fees, such as seeking legal advice about restructuring the finances of a business to take IRHP payments into account, that have been incurred as a result of dealing with the unfortunate consequences of a mis-sold IRHP may also be recovered. However, legal fees incurred as a result of trying to recover compensation from a mis-sold investment are more than likely unable to be claimed.
• Taxes – This is applicable to customers who must pay a tax on their redress that is greater than the taxes they would have paid on a properly sold investment. The specific tax treatment of a redress depends upon a customer’s financial and tax position as well as the circumstances of the case. Every customer should contact HM Revenue and Customs to confirm their tax position.
Every customer of a mis-sold IRHP investment should keep in mind that loss of profits claims take longer to review. For each consequential loss claim, the customer must provide evidence and demonstrate that all of the legal tests have been met.
In order to stop the ongoing financial bleeding and begin rebuilding their reputations, banks may want to consider offering customers a final settlement that includes basic redress and any consequential losses. By offering a complete and final settlement, all parties will be able to put the mis-sold investment fiasco behind them and finally move on.
Interest Rate Swap Claims News
Interest Rate Swaps court appeal begins
The first appeal hearing involving interest rate swaps begins today in the court of appeals. This appeal will have a significant impact on small businesses affected by interest rate swap products.
It is estimated that some 40,000 small businesses used an interest rate swap. These financial products were designed as a protection against interest rate rises on business loans. However this did not reflect in the interest on the loan when the interest rate decreased as a whole. This in effect created crippling interest rates for businesses who bought into these hedging products.
Mis-sold Interest rate swap costs Barclays £1.5mil
Barclays is to pay £1.5 million in compenation for a mis-sold interest rate swap according to the Guardian. The case has been in court for the past 3 years over an interest rate swap sold to a holiday resort owner in Cornwall.
The compensation will not be paid until further losses and hardship caused by the interest rate swap has been calculated.
The need to agree to these so-called consequential losses means Barclays has not yet paid out to any customers claiming compensation for mis-sold interest rate swaps, which were intended to protect customers against interest rate rises.
What Are Interest Rate Swaps All About?
Interest rate swaps allow traders to ‘swap’ the cash-flows of interest-rate bearing financial instruments. For example, Trader A owns a floating rate at five percent on a $10,000 nominal investment but would prefer to lock in a fixed rate whilst still owning the investment.
Plain vanilla interest rate swap. To achieve the preference, Trader A exchanges interest rate cash flows with Trader B. This transaction is an illustration of a “plain vanilla swap,” according to author Howard Corb (“Interest Rate Swaps and Other Derivatives,” 2012)
Mis-Sold Interest Rate Swaps update for SME’s
Frequent reports have highlighted the problems faced by small and medium sized businesses, commonly known as SMEs, who have been mis-sold interest rate swaps. The topic becomes especially sensitive when one considers that SMEs have been projected as being solely responsible for lifting the UK out of its current recession. The fact remains that interest rate swaps taken on by SMEs can lead to catastrophic results.
Do i qualify as “non-sophisticated” for an Interst Rate Swap Claim?
The Financial Conduct Authority (FCA), previously the Financial Services Authority (FSA) has created a set of questions and answers to determine whether a customer who was sold an interest rate swap product qualifies as “non-sophisticated” and therefore eligible to make an interest rate swap claim.
Please Note: If you feel that you fall within some of the questions, please do not hesitate to contact Maple Leaf Financial for a No Obligation chat.
Mis-sold interest rate swap flowchart
Derivatives may be one of the most complicated financial investments on the market. The Financial Conduct Authority (FCA) has created a chart to help consumers, barristers and bureaucrats understand whether a potentially mis-sold Interest Rate swap Hedging Product (IRHP) can be reviewed. The Financial Conduct Authority (FCA) Interest Rate Flow Chart uses a flow diagram with “Yes/No” questions to show whether a debtor qualifies for regulatory review.
Mis-sold Interest Rate Swaps to Small Businesses
As the global economy remains weak, there is more litigation over mis-sold interest rate swaps to small businesses. When a company starts to have financial problems, it might consider lawsuits to get back money from investments gone bad. It might be a desperate gamble but it is becoming more commonplace.
About Interest Rate Swap Claims
We reviewed the types of Interest Rate products that have been sold by the four largest banks and the ways in which they were sold to SMEs.
We found that when properly sold, in the right circumstances to the right customers, these products can protect customers against the risk of interest rate changes. However, when sold to ‘non-sophisticated’ customers, likely to be smaller business which wouldn’t necessarily have specific expertise and understanding in this area, some products may not have been appropriate for their needs.
In these cases, we found that the banks did not follow our rules in a number of areas, including how a number of interest rate products were sold, in particular the sales of structured collars.
As a result we have agreed the following redress and action with Barclays, HSBC, Lloyds and RBS.
What this means if you bought a structured collar
You will be entitled to redress if you bought a structured collar product and your bank believes that you may not have understood fully what you were buying. The bank will be writing to you explaining this, and you may need to respond with further information about your case. This applies to customers who bought the product after 1 December 2001.
What this means if you bought other interest rate swaps, hedging products (except caps)
If it believes that you may not have understood fully what you were buying, the bank will ask whether you would like your case to be reviewed. Along with an independent review, it will then decide whether you are owed redress.
What this means if you bought an interest rate cap
Customers who bought caps have not automatically been included in this review. However, you can still complain to your bank if you are concerned about your product.
Interest Rate Swaps
What is a Swap?
An interest rate swap is a type of financial transaction that occurs between two parties. Each party agrees to exchange future interest payments on specified assets with the other party. Agreements of this type are usually structured with a beginning and ending date, although the two parties can choose to leave the end date open if they like.
Structuring an interest rate swap involves the identification of specific interest bearing assets that each are owned in whole by each party. In addition, the interest generated by those assets must provide some perceived benefit to each party participating in the swap. Once the assets are identified and terms are worked out between the two parties, the swap can commence and continue for the period specified within the agreement’s terms and conditions.
What Can Be Accomplished With an Interest Rate Swap?
One of the more common strategies with an interest rate swap is to make an exchange that helps to minimize exposure for a certain period of time. At times, the goal is to use this approach to hedge against possible shifts in the economy that in turn has some effect on the average interest rate. For example, an investor may want to structure an exchange using an asset with a fixed rate of interest. He or she will search for another party who is willing to swap the interest on that fixed rate asset for one that carries a floating or variable rate of interest. This approach can often be practical if the LIBOR rate is expected to fluctuate significantly over the next several months.
In order for the swap to truly be successful, each party must benefit from the exchange. Along with helping to minimize exposure for a period of time, there is also the expectation that some sort of monetary gain will occur from the arrangement.
Example of Swapping Interest Rates
One of the easiest ways to understand interest rate swaps is to consider an example. Company A wants to loan funds, with the lending set with a fixed interest rate. Company B currently is able to manage loans at a fixed rate that is slightly lower than Company A. Company B can issue debt at its lower rate and then trade those obligations to Company A. Company A will then use variable or floating rate obligations as part of a swap with the fixed rate obligations issued by Company B.
If both parties have provided full disclosure about the particulars of the arrangement and they have agreed to use a standard for the floating rate, such as the LIBOR rate, then there is the chance for everyone to benefit. Both parties share the cost of the lending structures, something that helps to increase their net profits from the swap.
Maple Leaf Financial will review your interest rate product and we will be happy to discuss your individual concerns and requirements
Free Phone: 0800 7747624
Maple Leaf Financial
4 Sadlers Court
Oakham Office Park,
Tim Capper reports on Financial Mis-Selling for Maple Leaf Financial. Our aim is to ensure you get honest advice and proper guidance to ensure a suitable recommendation can be made to pursue a financial claim