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Interest Rate Swap Mis-selling Advice

Our litigation solicitors and barristers have the perfect skill set to act for SMEs seeking to resolve mis-selling of swaps – interest rate hedging products (IRHPs) and derivative embedded Fixed Rate Loans – by banks and insurers.

We provide the very best swaps mis-selling representation and use our banking and financial services litigation expertise to ensure we obtain the best possible results and refunds for our clients.  We’ve advised hundreds of businesses seeking redress via both litigation and via the FCA / FSA Review process for the mis-selling of IRHPs (see as well as those with ‘Hidden Swaps’ or fixed rate loans with embedded derivatives (see

“In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”

Warren Buffet (Berkshire Hathaway Report, 2002)

Our lawyers are regularly interviewed by journalists and broadcasters and featured in the media commenting on swaps mis-selling. See our Media Appearances.

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What interest rate swaps (types of derivatives) were mis-sold?

An interest rate swap is a complex financial instrument (a type of derivative) where two parties agree to exchange interest rate cash flows. The parties interchange from floating to fixed rate interest rates. So one party goes from paying a fixed interest rates to floating interest rate and vice versa. The parties do not swap interest rates directly but rather through a financial ‘middle man’ which is often a bank.

An interest rate swap is just one type, of a potentially infinite number, of over the counter (OTC) derivative that can be packaged and offered to customers such as SMEs in the UK. They are sophisticated complex financial instruments that only experts with access to market data and appropriate training and experience can truly understand, price and analyse. There exist a potentially infinite number of OTC derivatives however we have typically seen the following examples:

  • Interest Rate Caps
  • Interest Rate Swaps
  • Interest Rate Collars
  • Structured Collars
  • LIBOR Swaps
  • Caps and Collars
  • Dual Rate Swaps
  • Callable or Cancellable Interest Rate Swaps
  • Interest Rate Caps with Knock-in Floors
  • Tailored Business Loans (see below)
  • Fixed Rate Loans see below)

The above were sold by a large number of banks such as  Barclays, HSBC, Lloyds and Royal Bank of Scotland (Natwest), Allied Irish Bank (UK), Bank of Ireland, Clydesdale and Yorkshire banks (part of the National Australia Group (Europe)), Co-operative Bank, Northern Bank, Santander UK and by building societies such as Nationwide and even in the case of Fixed Rate Loans by insurer lenders such as Norwich Union / Aviva especially to GPs via GPCF.

Fixed Rate Loans and Tailored Business Loans

Some banks, such as Clydesdale, Yorkshire, Lloyds, Santander, Barclays, RBS and building societies such as Nationwide and West Bromwich and insurer lenders sich as GPCF/Aviva also sold swap derivatives embedded into a commercial fixed rate loan product and the customers may only have heard about the swap when trying to exit the loan.  They often then discovered massive swap/hedging break fees or “Early Repayment Fees” attached to the loan. These are cases that ought to be carefully considered and advised upon given that it the typical small business customer would expect a break fee to be similar to a domestic mortgage early redemption fee and not based on fluctuations to do with a swap contract they had no knowledge of.

A product known as a Tailored Business Loan was/is sold by Clydesdale Bank plc (trading as Yorkshire Bank and part of the National Australia Bank Group Europe (NAGE) which itself is the European retailing arm of National Australia Bank Group (NAG)). TBLs were sold with a multitude of derivatives contracts attached including complex OTC derivatives options such as Dual Rate Swaps.

Whilst there is no precedent case law we, together with our counsel teams and hedging experts, consider that Tailored Business Loans and Fixed Rate Loans act in a similar way to a standalone financial instrument (per the Regulated Activities Order (the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)). Arguably the impact on the purchaser is worse as they will not even understand they were entering into a contract whereby they were liable for the adverse costs of a derivative. We note that Clydesdale Bank plc (t/a Yorkshire Bank) TBLs are part of the FSA review over the sale of such complex financial instruments from which some limited comfort can be derived that the FSA agree with this analysis.

For further information please call us on 0207183029 or see

Background to Interest Rate Swap Mis-selling

Retail banks aggressively marketed OTC derivatives and sought hedging as a mandatory lending requirement from their SME customers in the period 2005 to 2008 usually on loans of around £1M or more in value. Derivative sales can generate huge immediate book profits for banks. Banks were therefore offering loans to SMEs whereby they often forced (by condition precedent in Loan agreements) these businesses to enter into interest rate swaps. Such swaps were sold as the ideal ‘interest rate protection product’ guarding against the financial consequences of interest rate rises. Interest rates however plummeted in late 2008 leaving clients not only paying for a product which was unnecessary but suffering devastating financial consequences of the swap itself; a product most small businesses weren’t equipped to understand. We have seen clear evidence that interest rate swaps were mis-sold by well known high street banks to small and medium enterprises (SMEs). We act for clients seeking to pursue the banks in order to resolve the financial impact of such mis-selling. We have dealt with clients that were mis-sold LIBOR swaps, Base rate swaps, Interest rate caps, callable/cancellable products, Base rate collars and Fixed Rate Loans with underlying swaps.

How did the Banks Mis-sell Swaps?

When selling complex financial instruments, or products, such as interest rate swaps there is a duty of care on behalf of the seller which is heightened by reference to the type or class of customer. The banks may also have made misrepresentations as to nature of the hedging and the contingent liabilities attached to the hedging contract(s). The duty of care itself exists in both common law and statutory law. The level of the duty of care can be expressed by reference to the Financial Services Authority’s (FSA) Conduct of Business Sourcebook (COBS) rules. The FSA requires sellers, in this case banks, to provide a full explanation of the effects of the product and the potential risks. Sellers are also required to make sure the product is suitable for the client. The banks are obliged to follow these principles and rules which are set out in the FSA’s COBS rules. In many of these sales (sometimes to captive UK SME customers) the banks breached this duty of care by: (i) not explaining to their customers the possible detrimental effects of the interest rate swap and the associated risks together with (ii) failing to consider that an interest rate swap may well not be the most suitable product for their client.

Missold Swap? Legal Solutions to Hedge Mis-selling

If you have been mis-sold an interest rate swap there a number of possible solutions. These include:

The initial step may be to attempt to negotiate with the bank and to seek to reach an agreement although this is often very difficult to achieve without threatening and/or commencing legal action. Pre-action advice, information gathering and correspondence is managed by our specialist swaps solicitors who consider the facts of your case, the circumstances the interest rate hedging was sold in and the bank’s position. We then prepare a detailed pre-action letter of claim to start off the negotiations. If negotiation is not possible to resolve a mis-sold swap then litigation will be considered. In the best outcome the contract can be rescinded which means that parties will be put in their original positions before they entered the contract i.e. before they were sold the interest rate swap. Our expert swaps lawyers can help we will assess your case and position and using their specialist knowledge and experience will strategise the best to way to commence proceedings against the bank. Another consideration is complaining to the Financial Ombudsman Service, via which process it may be possible to obtain compensation of up to £150,000 (for complaints made after 1 January 2012). Our specialist lawyers have experience dealing with the FOS and can assist clients as to the FOS’ rules and procedures. Where appropriate we can assist in making formal fully prepared and well presented complaints on clients’ behalf and can advise if litigation is a better option for redress, which in these cases it often is.

Why use a Specialist Interest Rate Swap Solicitor?

Derivatives are a complex subject matter which most generalist lawyers simply won’t be familiar with or understand to a level adequate enough to be able to recognise and formulate a mis-selling claim. Our specialist lawyers are degree level educated in banking and securities law and have professional experience in both financial services regulatory auditing and in litigation against banks. This experience has been gained not only at other leading city law firms but at the legal and compliance departments of the banks themselves. Our team will ensure your interest rate swap mis-selling claim achieves the best possible result in terms of putting you back in the position your business would have been in but for the swap. This usually means a refund of all balancing payments and escaping the ongoing contingent liability (ie avoiding incurring the break fee).

We work to achieve our client’s interests by attempting to negotiate with the banks wherever proper and commercially sensible to do so. When the time comes to issue legal proceedings we know how best to do so. If a without prejudice settlement approach is unsuccessful we seek on behalf of our client both litigation funding and after the event insurance policies and prepare and issue a claim without delay. Members of our legal team are also insolvency and winding up petition experts so if our clients face winding up proceedings or appointment of receivers as a result of a mis-sold interest rate swap we can quickly assist and advise in these areas.

Our Mis-sold Swap Lawyers get the best results

We endeavour to make the process as stress-free as possible for our clients and seek to eliminate the possibility of business or litigation failure. We know that each client’s case and business is unique, therefore we adopt a bespoke approach tailored to suit the client’s circumstances. We provide specialist senior legal advice from solicitors and barristers (including at QC level) at the outset when it absolutely matters in choosing the best strategy to follow. We are regularly instructed by regional solicitors’ firms to give specialist litigation advice and support in swaps mis-selling cases. We assist by:

  • Issuing legal proceedings & drafting documents/pleadings to support the mis-selling claim;
  • Assisting you in preparation of evidence to support your mis-sold interest rates swap case;
  • Appointing the right derivatives and hedging experts to ensure the best chance of success in litigation;
  • Appointing forensic accountants to assess and report on the refunds and consequential losses due;
  • Liaising with the bank and the Court and/or the Financial Ombudsmen Service;
  • Providing first class Court representation and advocacy; and
  • Developing (and aiding implementation of) strategies that allow the business to continue.

Please note: Claims Management Companies are regulated by the Ministry of Justice and are not law firms made up of solicitors and barristers. In these cases, they can only complain to the FOS. They cannot issue legal claims nor represent their clients at Court and may lack expertise in this area. You do not need a CMC to assist you and typically they will simply refer your case to a lawyer for a fee (from the lawyer). We do not accept referrals from CMCs.

Business rescue and Insolvency advice

We specialise in Litigation, Winding-up and Insolvency work and as a consequence we are able to add value by our legal services by guiding clients in these areas which are often ancillary to Interest Rate Swap mis-selling litigation. We can and have helped clients successfully defend winding up petitions brought by their banks and we can challenge the appointments of LPA Receivers, Auctioneers and also advise as to how best businesses can be rescued and turned around and how debts can be written off or restructured. If your business has already suffered terminal loss due to (either in full or part) a hedging product from your Bank please still contact us. We can provide advice on obtaining an assignment of the right to bring legal proceedings against the Bank from the Administrator or the Trustee in Bankruptcy as appropriate and have experience in doing so.

Free initial consultation

If your business is a party to an interest rate swap which you feel was mis-sold we, as specialist interest rate swaps lawyers, are able to assist. We invite you to contact us so we can assess your claim. We can subsequently provide urgent help, advice or representation to clients from our expert legal team of leading financial services mis-selling litigation solicitors and barristers. Just call or email us now for a free initial consultation; our legal team are waiting to help.

Our Media Appearances

As leading financial services litigation experts regularly fighting banks, building societies, bridging lenders and insurers we have advised, featured and commented to the media on numerous occasions. Some of our media citations and appearances appear on our Media Interest page.

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Contact our specialist hidden swaps lawyers for a consultation: ☎ 020 7183 0529 or email [email protected]

Please note: As legal claims will be centred around breach of contract, claimants run the risk of their claim becoming time or statute-barred by virtue of s.5 of the Limitation Act 1980. This applies six years after the date of the hidden swap agreement. Therefore it is vital to instruct solicitors promptly. 


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.