Daniel Fallows

please read my new thread, you may find it useful Interest Rate Swap Claims – The Dangers Of Sitting Back

http://www.property118.com/interest-rate-swap-claims-the-dangers-of-sitting-back/41474/

Daniel... Read More

@BB Member

We advise all our clients that it is prudent to prepare written responses for the purpose of the FSA Review fact find rather than the person who entered into the swap trades being subjected to a one sided inquiry, in order to secure maximum redress.

does that help?... Read More

@Simon

The Banks have appointed independent reviewers who may be present during the fact find meetings or calls. The independent reviewer is there to ensure that the outcome of the Review is fair and reasonable. The independent reviewer will not actually conduct the Review. The Review will be conducted by the Banks themselves. The reviewer is there to ensure that the bank’s review is fair and reasonable and to ensure that it achieves a satisfactory outcome.

does that answer your question?... Read More

@Chris, unfortunately we are unable to comment as to what the Banks have been doing in preparation of their internal reviews. Where a fact find meeting takes place with the client that is normally in the presence of an independent person, typically from an independent law firm, who will ask the clients questions to understand the clients perspective as to how the interest rate hedging product was sold. The FCA have requested that independent persons take part in the process to ensure that the process is fair however, this is yet to be seen.

If a client did not fully understand the product at the outset how can they be expected to understand the product, and an offer of compensation? How can a client assess the true value of their losses if they cannot get access to the market rates?

We would highly recommend taking independent advice as these products are highly complex and the financial offer from the Bank will likely be complex.... Read More

Excellent question Tom. This is question a lot of our clients have been asking. If the Banks mis sold the interested rate hedging products in the first place can we trust that they will review them fairly and that any offers made for redress will be fair? We ensure that for all our clients we obtain all of the information that the Banks have previously provided to the clients pre sale, assess this against the Banks regulatory requirements and then calculate the clients losses using the same historical banking data to accurately assess the clients losses and costs. Given our experience and expertise in the financial, legal and banking requirements we pride ourselves on being able to assess, and advise, whether an offer from the Banks is a fair deal for our clients.

look at the this link it may help!

http://senecapartners.co.uk/2013/06/seneca-banking-is-the-fca-review-process-fair-and-independent/... Read More

What do you think of this article? please comment and ask questions relating to your own circumstances

Firms as small as bed and breakfasts and takeaway shops were left with major bills after buying the complex financial products linked to interest rates without fully grasping the risks - and as many as 40,000 could now launch claims.
One case highlighted by Financial Mail on Sunday involved Colin Aldous and his wife Julie, who run Ufford Park golf and spa hotel in Suffolk, a £5million-turnover business employing about 200 staff.
So far they have paid £750,000 in interest, but when they tried to get out of the contract they were told it would cost £450,000.
HOW INTEREST RATE SWAPS WORK
The phrase ‘interest rate swaps’ is often used as shorthand for several products used by firms with outstanding bank loans to cut their exposure to rising interest rates.
Different types include swaps, collars and structured collars.
A customer who purchases a swap buys a contract that pays them money if interest rates go up from a fixed point. This will offset the higher costs on their loan. Conversely, if rates go down, they will be required to pay money to the bank, but that will be offset by the lower interest rate on their loan. The overall effect should be effectively to fix the interest rate for the customer.
However, it was never envisaged that interest rates would fall to the historic lows seen in the wake of the banking crisis, and this has caused buyers to face unexpected costs.
The other products causing most problems are structured collars. A collar, as its name suggests, is a product that limits the range within which the interest rate on a loan can move.
But structured collars add complex terms and conditions that can mean if rates fall to an extreme low as they did in 2008 and after, the customers actually face higher costs.
Another case involved Mike Lloyd and Rodney Hall, who set up pub chain Sarumdale in 1991. By 2006 they operated 23 outlets across London and the South East and employed 240 staff.
But Sarumdale found itself paying more than £300,000 a year in interest as well as a further £400,000 for capital repayments, and ended up in administration.
The banking industry now faces another hefty compensation bill after a long list of scandals, including the widespread mis-selling of payment protection insurance and the Libor interest rate-rigging debacle.
High Street banks also stand accused of gambling the hard earned savings of customers by failing to stick to rules for financial advice following a secret investigation by the FSA published yesterday.
It is believed 40,000 interest rate swaps could have been mis-sold to small businesses since the end of 2001 after the FSA highlighted 'serious failings' in the sale of the products last summer.
Barclays revealed earlier this month it was upping its swap mis-selling provisions to £850million and said it sold around 4,000 interest rate swaps to small businesses of which around 3,000 were likely to be liable to potential mis-selling claims.
RBS has already set aside £50million, but said late last month this would be 'meaningfully' increased after the FSA's recent guidance on how to review cases.
Santander UK also said it uncovered a raft of former Alliance & Leicester small business customers that were potentially mis-sold interest rate swaps and has put by £232million to cover costs, including compensation for mis-selling of interest rate swaps.
The British Bankers' Association said: 'The FSA's recent announcement gives clarity to businesses and is enabling the banks to put in place the steps needed to resolve each case for customers.
The BBA added: 'Banks will be contacting those companies affected shortly, prioritising those with the greatest need.
'Any business which is currently facing financial distress and is seeking a suspension of payments should get in touch with their bank immediately.'
Interest rate swaps are complicated derivatives that might have been sold as protection - or to act as a hedge - against a rise in interest rates without the customer fully understanding the downside risks.
They were marketed as low-cost protection against rising interest rates, often as a condition of a business loan.... Read More

interest rate swap agreements (IRSA’s) and interest rate hedging products (IRHP’s) were potentially sold alongside any loan, debt or mortgage facility. It is possible that an IRSA or IRHP was sold alongside a buy to let (BTL) mortgage regardless of whether the client is a company, small business owner or individual.

IF you have been asked to enter into an interest related product in addition to the BTL mortgage this is likely to be an IRSA or IRHP. With some Banks however they have built the IRSA/IRHP into the loan itself, these are often called Tailored Business Loans (TBL’s)... Read More

@David Hands

“The calculations of both direct losses (i.e additional interest payments made to the Bank and potential break costs) and consequential losses (i.e loss of opportunity, cost of additional finance) can be complex and highly fact sensitive. We would be more than happy to have an initial conversation with you and provide some guidance. Please feel free to contact us. Just fill in the contact sheet at the top of the page and we will give you a quick call.

does that help David?... Read More

Answers to popular questions from people who have completed the enquiry forms

Why are businesses not coming forward to claim redress on mis-sold Interest Rate Hedging Products?

I have been working at the forefront of the industry since the start and I have helped hundreds of businesses from SME’s to large Corporates start the claims process to get redress on mis-sold Interest Rate Swaps. The issue has been raised in parliament and has been heavily featured in the press but still the numbers that are coming forward compared to the predicted numbers mis-sold is way out of proportion. It is estimated that 40,000 businesses have been mis-sold interest rate swaps and other types of hedging products but only a fraction of that number have come forward to claim redress from the banks.

So what’s stopping them?

Upsetting the relationship with the bank
One of the biggest reasons for people not coming forward is that they do not want to upset the bank. Many businesses are reliant on the banks and are scared that overdrafts will be called and future financing will be rejected. The FCA has stated quite clearly that banks should not treat business any differently if they have submitted a claim and has instructed the banks to not change any financial arrangements during the review process that could harm the business. With the banks reputations being tarnished so much already another scandal of unfair treatment is something they do not want.

Worried that claiming is expensive

A lot of businesses are afraid that starting a claim is expensive. This is sometimes the case when using some firms. Be sure to use an actual true expert in the area. The bulk of Seneca Banking Consultants fees are on a contingency basis, a no-win no-fee basis, and will therefore only become payable when awarded redress.

Don’t know if you have a swap?

From talking to hundreds of clients I have picked up on the fact that many of them didn’t know they had an interest rate hedging product, most people just sign paper work and don’t fully understand what they are signing, and as I mentioned earlier some banks wouldn’t agree to the new loan unless you took out an interest rate hedging product so people felt forced into quickly signing paperwork they hadn’t fully read and digested. What you can do is just send your documents into Seneca Banking Consultants and we can offer a free initial consultation.

Claiming is time consuming.

Claiming redress for a mis-sold interest rate swap or other hedging product isn’t as time consuming as you think if you use an expert. Choosing the right company to help you claim is crucial. Using a company that is not fully up to scratch on the products could cost you more time, effort and money. A true expert firm will take your paperwork and do the work for you, updating you as your case progresses.

The Banks are sorting out the issue

The banks are looking into cases under the review of interest rate hedging products but this is going nowhere fast. Many business are suffering huge financial implications as a result of mis-selling and need the matter looking into now. Some banks are prioritising some of the more rare interest rate hedging products but what about the most common products like interest rate swaps? A lot of the larger firms have cash flow that can ease the burden put on them by the interest rate hedging payments but smaller firms need to see results before it’s too late. Using Seneca Banking Consultants today could assist you in freezing payments on the product which hopefully can make a difference.

Embarrassed about the mess

Another reason why businesses are not coming forward is that they may be embarrassed about the mess the Banks have got them into. Remember this product was meant to protect your business. You did what you thought was right for your business and staff; it is the banks that mis-sold the product to you.... Read More

How would a care home (old people residential home) look into this?... Read More

@Neil

Thanks Neil, if you have any more questions feel free to ask away... Read More

@Neil

Interest rate hedging products, in the form of caps, floors, collars and swaps to name but a few, have been sold by Banks to a number of clients on the basis that they would provide certainty over the interest rate to be paid in respect of an underlying loan. In very simplistic terms they work as follows:

Swaps are where the Bank will swap the floating rate of interest the client pays under the loan with a separate fixed rate. They were sold to the client as a way of fixing the interest rate payable rather than being subject to the risk of a variable interest rate. A number of companies were moved over to fixed rates in the region of 5-6% and then when the market rates decreased to 0.5% the company was still paying interest at the higher fixed rate.

Caps and Floors have been sold, respectively, as maximum and minimum interest rates payable by the client. With a Cap, if the interest rate goes above the cap rate then the client will only pay interest at the agreed cap. The client can therefore benefit from reductions in interest and will not be punished by increasing rates above the cap rate. The client will pay a premium for this product. With a floor, if the interest rate goes below the floor rate then the client will pay interest at the floor rate. The client will therefore not benefit from reductions in interest rates below the floor and runs the risk of increasing interest rates. A Cap and floor together is called a Collar.

The reason a lot of people have been financially damaged by these products are that they are separate agreements to the loan itself. So if the loan is repaid early then interest under the interest rate hedging product is still payable for the term of the agreement. For example a client may have taken out a £5m loan with a £5m hedge, both for 10 years. If the loan was repaid after 6 years the client would still need to make interest payments for another 4 years. Banks have tied clients into agreements for periods longer than the loan period, as per above.

They have also charged interest on sums larger than the loan amount. If the above £5m loan was being repaid so after 3 years the loan itself was only £2m, the interest rate hedging product may still be at £5m. So the client is in fact paying interest on a £5m sum when the loan is now in fact £2m.

There are a number of complex issues as to why interest rate hedging products have been mis sold and a number of ways that they are financially affecting those who entered into them. I hope that the above goes some way to explain how complex these products can be and how wide ranging the impacts of these products has been.

does that help?... Read More

@GP

The behaviour of the Banks in recent years has been well documented and in many cases well below the standards expected of the profession. The FCA Review process came about as a result of the numerous breaches of conduct and acceptable practice by the Banks. The FCA review into the mis-selling of interest rate hedging products, such as swaps, caps and collars, places the Banks under a positive obligation to provide evidence and documentation and to actively compensate the affected persons. We are comfortable that continued political and regulatory pressure on the Banks will keep the process open to inspection.

We are actively engaging with the Banks and with the FCA to ensure that the Review remains open and transparent, for example confidentiality clauses which are so often part of negotiated claims under litigation are likely to not be allowed under the Review. Where relevant we also engage our clients in standstill agreements with the Banks to protect their statutory limitation period and therefore protect their rights to litigate should they not be happy with the Review process.

Is that any help?... Read More

How might taking an IRSA have affected you and your business?

The ways in which an IRSA might have negatively impacted upon your business and you personally are numerous and varied. Typically, an IRSA would result in being paid to the bank in excess of what it would have been were in not for the IRSA, as a consequence of the base rate falling. At the lower end, this resulted in less substantial profits for the business than would have been the case, were it not for the IRSA.

In March 2009, the recession resulted in interest rates being reduced to a historic low of 0.5%, where it is expected that they will remain for the foreseeable future. Collars and Base Rate Swaps meant that customers began to pay artificially high interest rates on business loans. Of course, any assets of a business, in terms of savings in a business account, for example, would only attract a nominal rate of interest.

The financial crisis had not been predicted by many and, when it hit, it resulted unforeseen problems for many businesses. Cash flow problems for customers meant that suppliers would often experience delays in receiving payment, or would not be paid at all, resulting in their own cash flow problems. In many cases, businesses could not service the artificially high interest rates due on their business loans. Failure to keep up with the loan repayments often resulted other costs such as:

1. Administrative charges – These were commonly applied to accounts which were in arrears;
2. Accountant’s fees – Some businesses were required by their bank to undergo an expensive review of their finances by the bank’s accountants, the cost of which would be charged to the business.
3. Legal fees – Where banks took legal action, its legal costs were applied to the customer’s account.
The reality for many small businesses was that the situation was unsustainable and they were forced under. Other businesses struggled on, but continued to suffer losses and/or substantial loss of profits as a result of the unfair agreement they had entered into with the bank, coupled with the economic climate.

The consequences for the individuals running small and medium sized businesses were often disastrous. Many ran up considerable personal debts in an attempt to fund their business. In some cases, people would stop paying for other items in an attempt to juggle their finances. For example, frequently people would not maintain the payments due under a finance agreement for a car or other vehicle, resulting in the vehicle being repossessed. For a sole trader, this would almost certainly be the final nail in the coffin. In extreme cases, people would find themselves unable to maintain their mortgage payments, resulting in their home being repossessed. Repossessed properties are commonly sold at auction, often for less than the market value. Coupled with the collapse in housing prices, this regularly resulted in mortgagors owing a shortfall on the mortgage.

any questions please ask away... Read More

@Simon

Where a claimant is unsuccessful under the Review process they may still be able to claim through the Banks internal complaints procedure of the Financial Ombudsman (FOS) prior to litigation. Litigation will always remain an option where the claim is not stature barred. The Jackson Reforms will have an impact on the costs that are recoverable under Conditional Fee Agreements (CFAs) and After The Event (ATE) insurance entered into post 1 April 2013. We are engaged by clients on a contingency basis, in effect ‘no win – no fee’ but in line with the Jackson Reforms our payment will arise from any recoveries from the Bank and will be payable by the client.

We are not a law firm and so will not manage litigation on behalf of our client but would refer them to a specialist law firm who will run any litigation at preferential rates. They will also be able to advise on the options available for CFAs, ATE and also damage based agreements (DBA’s) which hold that an agreed percentage of the damages will be payable by the claimant to the law firm. These are capped agreements and so provide security as the extent of any costs to be paid by the client.

Does that help you? any other questions?... Read More

@Mark

Great Minds lol... Read More

@Mark

Yes it did get a bit technical but I am happy to answer any questions from experts in the subject or anyone who has been affected, no comment or question is too small just ask away. Have a nice day Mark... Read More

Hi Simon

There have been some reported offers of redress under the initial review carried out by the FCA however the numbers are at present modest. The Banks appear to be moving slowly on reviewing files and subsequently their offers of redress, due in part to a lack of guidance and pressure from the FCA but also there is an ongoing judicial review as to the scope of the review.

Whilst the Banks may be moving slowly at the present they are contacting a number of their clients for fact find meetings and will then make ‘fair and reasonable’ offers of redress. It is unclear whether their offers will include all of the clients direct losses or any of their consequential losses. We ensure that our clients’ claim is fully documented and evidences so when an offer of redress is made our clients are able to consider its true value.

does that help?... Read More

@Mark sorry for the late reply see comments below

1) Is Seneca Banking Consultants underwriting the cases you take on?

Seneca Banking Consultants are a Ministry of Justice regulated claims Management Company. We have the expertise both financially and legally to manage and provide advice to our clients from identification of their claim through to calculating and reclaiming their losses. Within the team at SBC we have senior bankers, financial experts, lawyer and accountants.

2) Would I be right in thinking that private landlords are more likely to have been affected if they had very large debt exposures to mainstream lenders and if so what is typical?

Private landlords may have been sold a number of interest rate hedging products from collars to swaps to caps. Generally speaking the larger the underlying debt exposure the more likely it is that an interest rate hedging product was entered into. We are finding that swaps, collars and caps have been mis-sold to individuals on loans and mortgages as low as £100,000

3) How might a claim impact upon an ongoing banking relationship?

The FCA (previously the FSA) has requested that any claim against the Banks not impact the ongoing client relationship but there will always be some risk that it may impact the client – Bank relationship and that is something that the client will need to consider. As many clients retain ongoing facilities with the Bank it is crucial that the claim is handled diligently by experts who are experienced in dealing with the Banks.

4) Would people know whether they had an IRSA or IRHP?

The majority of interest rate hedging products (IRHP’s) or interest rate swaps agreements (IRSA’s), whether caps, collars or swaps, were sold as separate agreements and so would have been entered into alongside the underlying loan. However, in some cases the clients do not know that they were entered into a hedging product. If you took out a loan between 2001 and 2012 it is likely that you were also sold an interest rate hedging product. We would be happy to advise if people are however unsure.

5) How might these products have affected a business?

Entry into an interest rate hedging product can affect a business in many ways. From being over charged an initial premium, to paying for an interest rate in excess of current interest rates for an unreasonable length of time. Many of our clients have been sold interest rate hedging products for amounts and periods that do not match the underlying loan. A number of businesses were simply unable to keep up repayments, some times for loans they had repaid but were tied into the interest rate hedging product, and so have been forced to sell assets or enter in administration/liquidation.

6) What are the likely time and cost implications of initiating a claim?

For our clients, where a claim falls within the Review we charge a small review or commitment fee which is only payable at the point of sending off the claim, together with a detailed financial report, to the Bank. We also charge a contingency fee payable upon the client receiving redress or compensation from the Bank. Our fees are dependent upon the success of the clients claim. Where the client wishes to litigation (bring a claim through the courts) then we have a nominated solicitors we refer claims to who charge a reduced, preferential rate.

7) How will you arrive at Quantum?

In Jon’s case he lost a thriving businesses, the spin of personal implications of that are also huge! Quantum is calculation of both direct and indirect (consequential) losses. Direct losses will include payments made to the Bank above those that would have been paid with a more suitable alternative product. It may also include break costs (calculated at market rates) and sometimes first day profits. Consequential losses, where they can be evidenced can be loss of business opportunities, loss of profits, additional lending and banking charges. Consequential losses can be complicated and so we look at all losses before claiming them from the Bank.... Read More

@Jon

Whilst the non-disclosure of the interest rate hedging product liabilities, including mark to market break costs, contingent liabilities and day one profit are often clear breaches of the COB and COBS regulations they are often not the only breaches. It is important to consider the whole of the pre-execution correspondence and information on a case by case basis to identify the full range and impact of any COB and COBS breaches. For all of our clients we undertake a thorough review of all of the available documents and where there has been a breach to document this with documentary evidence, or at times the lack of such evidence

do you have any other comments?... Read More