Our firm are experts in dealing with Fixed Rate Loan (Hidden Swap) mis-selling cases and have achieved significant settlements for clients in terms of recovery of embedded derivative break costs and interest and legal costs.
Claims brought by individuals who were mis-sold a fixed rate loan (FRL) are not necessarily time-barred as we have developed inventive litigation strategies to successfully bring such claims.
What is a Fixed Rate Loan (FRL or TBL)?
FRLs are ‘Loan agreements with embedded swap/hedging terms’. They carry massive break cost risk and contingent liability that customers are unlikely to have actually understood.
A number of major UK banks and building societies sold over 60,000 FRL products to customers in the decade or so from 2001. Well-known banks and building societies engaged in such practice, for example: Lloyds Bank, Nationwide, Yorkshire Bank/Clydesdale Bank (known as TBLs – Tailored Business Loans), RBS/NatWest, HSBC, HBOS and Barclays.
Several of these financial services institutions have settled and continue to settle mis-sold FRL claims once experienced FS Litigation solicitors are instructed.
The Embedded Swap/Hedging Terms
Fixed Rate Loans have properties which behave in a manner similar to complex financial derivatives, which provide customers with the certainty of knowing what their interest rate will be for a fixed period of time in return for a large financial risk.
In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.Warren Buffet, Berkshire Hathaway, Annual Report, 2002
Warren Buffet has described derivatives as weapons of mass financial destruction; derivatives sales in the UK and EU are heavily regulated meaning they cannot be sold to unsophisticated customers. However, once embedded into Fixed Rate Loans, banks avoided the UK FSMA regulatory framework and mis-sold the products widely.
What is the problem with Fixed Rate Loans?
As well as massive break costs risks on exit, other problems we have seen are that the lifetime of the interest rate fix may not, however, be the same as the lifetime of the loan. In many cases, the fixed term of the interest rate fix may be shorter; exposing customers to fluctuating interest rates after the end of the fixed rate period.
Most concerningly, many of the fixed rate loans sold by high street banks in recent years expose a customer who wishes to refinance their loan before the end of the term of the fixed interest rate, to significant break costs.
Litigation Recovery of Break Costs
Lexlaw Solicitors & Barristers are the leading law firm in this area and have helped more clients bring swaps mis-selling litigation than all other law firms in the UK combined.
Our successful litigation work has been reported on BBC News, Panorama, Sky News, ITV News, 4 News, The Times, The Sunday Times, The Financial Times, The Daily Mail as well as many other publications. The firm’s work was also mentioned in ‘Shredded: RBS – The Bank that Broke Britain’ – an investigative book by journalist Ian Fraser and in many other publications as well as cited in the UK Parliament by MPs.
We can assist you to bring a compensation claim if:
- you have been sold a Fixed Rate Loan
- are an individual customer (not a Limited entity appearing on Companies House)
- or are a partnership (not an LLP appearing on Companies House)
Most swaps mis-selling claims are now time-barred by virtue of the Limitation Act 1980 (save for where s 32 LA 1980 can be pleaded for cases where fraud, deliberate concealment or mistake was a central plank of the claim.
Case Study: Settlement obtained for Individual Mis-sold Fixed Rate Loan
One of our clients entered into a fixed rate loan for a high value over a lengthy term which was secured against a property. The interest rate applicable to the loan was fixed at a rate equal to the interest margin plus a rate quoted by another division of the bank at the time of fixing.
Our client was paying a much higher rate than the market rate and therefore wished to re-finance his loan several years later, before the end of its term: and before the end of the fixed rate interest period. As a result of his desire to refinance the loan (which made financial sense save for the break cost), he was compelled to pay a significant sum of money which the bank attributed to its “break costs”.
This, to us, was a sign that the bank had hedged is own interest rate exposure in the interbank market and passed on all the liability and risk of that hedge to their customer. This was far from the hallmark of a fair banking relationship.
Our client had been complaining to the bank for years both himself and and via two other UK solicitor law firms and their counsel. None of these complaints had lead to any offer of resolution.
Lexlaw have a market leading reputation for acting for claimants in these categories of claims and the banks are well aware that we pursue litigation surefootedly and aggressively when needed including obtaining media interest on behalf of our clients.
Unlike the previous two law firms, Lexlaw was able to settle the claim and recover the break costs that its client paid, together with interest on those break costs. Furthermore we were also able to obtain a significant majority contribution towards our client’s legal costs.
Many people think that claims such as this are out of time by reason of the Limitation Act 1980. That is not, however, not necessarily the case where the fixed rate loan was sold to an individual. If you are individual who has been sold a fixed rate loan by a Bank in the past, please contact us as soon as possible so we can give you specific advice on your case.
Optimal Legal Results.
Our litigators deliver advanced legal strategies.
We analyse and work out the legal merits of running your case to trial. We calculate and advise on legal risk factors and the litigation rules in England & Wales. We factor in your risk-appetite, costs sensitivity and determination. Together, we plan the best possible result.
You’ll receive strategic legal advice from a barrister and solicitor at your first fixed fee meeting.
LIMITATION ACT 1980 – WARNING
The Limitation Act 1980 sets out strict statutory deadlines within which you must bring litigation claims. Your legal rights will become irreversibly time-barred if you fail to take legal action (or defend a claim on time). Therefore, you should seek specific legal advice about your legal dispute at the very first opportunity so that you understand the time you have left. Failure to take advice or delay in taking action can be fatal to your prospects of success.
Please note that for regulatory reasons we do not offer any free advice.