The real life devastation on interest rate swaps mis selling
It is estimated that 40,000 small and medium businesses have been mis sold an interest rate swap. Whilst clearly an overwhelming number, it is difficult to truly comprehend the impact these products have, not only on a business, but on the lives of the owners.
In 2007 Terri Flett, with husband Stewart, fulfilled a lifelong dream and bought a specialist dance hotel in Bournemouth. They agreed to an interest rate swap after their lender, Barclays, told them it would protect them against rising rates.
However, when rates dropped, their monthly payments shot up to £8000 while the exit rate sky rocketed from £38,000 to £347,000. As a result they had to sack staff and have been unable to afford essential repairs.
Following the Financial Services Authority (FSA now FCA) pilot scheme , the couple were contacted by Barclays who apologised for mis selling the interest rate swap and agreed to pay redress in the amount of £350,000.
Yet despite the admission the couple are still waiting and could be for up to a year, an incredibly distressing prospect considering they are living on just £100 a week, an income which has only come about after Stewart, 68, returned to work.
“Last year we were losing £600 a day,” explained Stewart. “We were on a downward spiral from the minute we signed the swap. It is mentally exhausting.”
“It feels like a game that we’ve got no chance of keeping on top of,” Terri added. “This has spoiled the dream for us.”
This story, which coincides with news that more than 2,400 city bankers were paid in excess of £870,000 in 2011, highlights the risk of relying on lenders.
Simon Cottrell is one of the Senior Partners at Goldsmith Williams who are assisting affected businesses:
“This case puts the interest rate swaps mis selling scandal into real perspective – a couple whose dreams were dashed by this financially crippling product have again been let down by their lender. Imagine their relief to hear Barclays’ admission of mis selling and confirmation of redress to then have that life saving carrot dangled far beyond reach.
“This demonstrates the dangers of relying of the FSA review scheme; that without specialist legal representation businesses are left at the mercy of the lender and its timeframes, a decision which could ultimately be the final nail in so many businesses’ coffins.”
Content correct at time of publication