Interest Rate Swaps Explained

Published: 14/12/2012


Hi. I’m Kara Britton, a solicitor and Head of the Finance Litigation Team here at Goldsmith Williams. Given the highly complex nature of interest rate swaps and the ambiguity surrounding those eligible for financial redress, we have developed a short video to provide some much needed clarification on this potentially devastating product.

Designed to protect businesses against rising interest rates, an interest rate swap allowed businesses to exchange their variable rate loan for a fixed rate. This meant that should interest rates continue to rise businesses would benefit from lower repayments.

However there is now evidence to suggest many businesses were mis-sold these complex financial products, particularly in light of the Libor rigging scandal. Lenders knowingly sold the product on the pretext of a rising market when they were fully aware that interest rates could soon drop.

In addition to this, lenders also failed to provide a full explanation of the risks around interest rate swaps including its financial implication should interest rates fall. As a result businesses are now facing crippling repayment charges with many collapsing under this significant financial burden.

Clients were also oblivious to the substantial exit fees which were often 50% of the total loan while others were given little, if any, time to obtain independent financial advice at the point of sale.

Having conducted a review of swaps products, the Financial Services Authority found serious failings in the sales practice used. Despite this there remains a strong degree of ambiguity surrounding those eligible for redress.

It is estimated that 40,000 enterprises could be victims of interest rate swaps mis-selling, although many predict this figure is closer to 100,000. If your business is affected by interest rate swaps, it is essential you contact a legal professional as quickly as possible. Potentially these cases have a six-year deadline to claim so we all need to act with urgency.

Goldsmith Williams is dedicated to helping all businesses affected by interest rate swap mis selling. We are well practised in dealing with lenders and securing financial redress through our excellent work in the payment protection insurance mis selling scandal.

We will thoroughly examine your complaint, advising you on the strength of your case, the likely outcome and the money you may recover.

We will then pull together the framework of your case before presenting it to the lender involved and, if necessary, to the Financial Ombudsman Services (FOS). If a satisfactory conclusion cannot be reached, we will advise you on your available options, including litigation. If you are still paying for an interest rate swap, we will also endeavour to get these fees frozen throughout the progression of your case.

Interest rate swaps have had, and are still having, a devastating effect on businesses throughout the UK. However with the help of our dedicated team of experienced solicitors, the financial future of your business could look a lot brighter.

Content correct at time of publication

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