MIS-SOLD: Interest Rate SWAPS, CAPS and COLLARS

Over a number of years, small and medium sized business enterprises (so called SMEs) became a target market for UK Banks looking to sell derivative products. These products took the form of interest rate swaps, caps and collars and, in some cases, even more exotic derivative products. In most cases, the swap was sold by the Bank as part of a related loan arrangement and, in some cases, the swap was a requirement without which the loan would not be made. These swap arrangements have, for many SMEs, proven to be absolutely toxic. They have resulted in economic hardship and, in some cases, the dissolution of the business. There has become a recurrent theme in the types of complaint that are being made against the banks. This relates, principally, to the conduct of the bank in the period preceding the entering of the swap. Examples of the issues on which complaints are founded include:

• The complainant did not understand the product. For example, the marketing material envisaged rates rising or reducing only modestly; the effect of low rates was not explained.
• The relationship between the loan and swap was not explained. What would happen if the loan was repaid in whole or part or refinanced?
• The complainant did not understand how an early termination payment (break cost) would be calculated. In particular, no indication was given as to the potential magnitude of any such payment.
• It seems that the banks often took call options. The effect is to enable the bank to terminate at no cost. The asymmetry between the position of the Bank and the SME on this issue is extraordinary.
• The documentation of the swap was confusing, not explained by the Bank and never properly understood.

Conduct of this type is capable of founding a legal claim.

Consequential Loss

We specialise in litigation with regards to the consequential loss suffered as a result of the mis-selling of the above mentioned products and have successfully obtained compensation from various Banks and we have had a high percentage of success rates in these matters. This aspect of claim is heavily evidenced based, but it can be successfully prosecuted.

Global Restructuring Group (GRG)

We are currently undertaking a review of the Global Restructuring Group (GRG) within RBS and considering the position in relation to potential legal action against RBS in this regard. We as a firm can bring experience and specific expertise to the negotiation table on behalf of your company and we would be happy to meet you, without obligation, at your own convenience, at your offices or any venue that is suitable to you to discuss your specific situation and see if we may be of assistance.