Interest Rate Swap Misselling

Many small and medium sized businesses have been mis-sold interest-rate hedging products. These products were sold, alongside loans to purportedly protect businesses from fluctuations in interest rates which could effect their loan repayments.

There are broadly four types of the products: swaps, caps, collars and structured collars.

 

The products are, by their nature, complex and it is therefore common for business not to be aware which product, if any, they have been sold. However, the products can lead to a significant increase loan repayments as they rely on a degree of speculation as to interest rates which effect the loan.

The FSA in the UK has found that major retail banks, including Barclays, HSBC, Lloyds and RBS, had poor sales methods. They did not fully inform businesses as to the benefits and risks of the products, assess if the products were suitable for the business’ circumstances, advising on products when they were not authorised to and financially rewarding employees for selling the products which may have skewed their judgment.

Many small and medium sized businesses have been mis-sold interest-rate hedging products. These products were sold, alongside loans to purportedly protect businesses from fluctuations in interest rates which could effect their loan repayments.

There are broadly four types of the products: swaps, caps, collars and structured collars.
The products are, by their nature, complex and it is therefore common for business not to be aware which product, if any, they have been sold. However, the products can lead to a significant increase loan repayments as they rely on a degree of speculation as to interest rates which effect the loan.

The FSA in the UK has found that major retail banks, including Barclays, HSBC, Lloyds and RBS, had poor sales methods. They did not fully inform businesses as to the benefits and risks of the products, assess if the products were suitable for the business’ circumstances, advising on products when they were not authorised to and financially rewarding employees for selling the products which may have skewed their judgment.

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