How to claim interest rate swaps
Small business owners should claim compensation from the banks' £3bn fund
According to the Financial Services Authority, around 40,000 businesses across the UK are estimated
to have been mis-sold interest rate swaps.
Many of these complex financial products were sold as protection for the business, but it now appears that a large proportion of sales did not fully comply with regulations and many companies are now being crippled with repayment costs.
The potential scale of this issue can be appreciated in the provisions being made by banks to cover compensation for this mis-selling. The industry as a whole has already set aside more than £3bn, and it is likely, much like with PPI, that this will only increase over time.
With swaps often being sold to those with property as collateral, the catering and hotel industry looks to have been
one of the worst affected by this latest mis-selling scandal.
While the suggestions below will hopefully help potential claimants with the ground rules, making a claim can be a long, complicated process. The thing to remember is that if you have been mis-sold you are due compensation. It might not make up for the stress the swap caused you but it is your right and should not go unclaimed.
Daniel Hall is managing director of All Square Treasury
Tips for claiming for compensation
Getting started
Though the majority of those affected should have received letters regarding potential claims from their banks by now, this is not always a timely process. If you have not yet received a letter, but suspect you may have been affected, look for advice on how to claim redress.
Act now
Claims need to be made within six years of the date you bought the swap if you want to seek redress through the courts. Those most at risk of being 'time-barred' are the small businesses that were mis-sold swaps in 2007-08. If you think you were mis-sold a swap or hedging product, or need more information about the issue, look into this as soon as possible.
Be prepared
Although there is an independent "skilled person" overseeing the banks' review of each case, they are appointed and paid for by the bank. We have seen businesses go through the review and come out the other end with nothing.
Another concern is that the banks' review team will have access to the relevant documents to conduct the review and the business may not. When the business has attempted to access the same documents, the banks have not released all the information on file, which is neither fair nor transparent.
Do your homework Prepare as much as possible for the review process and be clear about why you think you were mis-sold the product by the bank. Pursuing a claim is not always as simple, straightforward or as fair as you would hope, so make sure you don't go in blind when you get the letter from your bank inviting you for a review.
Keep faith
A number of industry onlookers have pointed out that it is already taking a long time for claims to be processed and reviewed. Don't lose heart if you don't get an instant result. You may be owed a huge amount of money, so be patient and be prepared for the long haul.
Understand the offer
If you do get an offer of redress from the bank, take time to understand how this offer has been calculated and what it includes. You should also think about claiming for any consequential losses that you have incurred as a result of the swap. Consequential loss could considerably increase the size of your total claim.
Be diligent
There is no appeal process in the scheme, so you only have one shot to get a result. Make sure you approach the review having done your homework so that you are fully prepared and can give it your best shot.
