Rise in Claims for Barclays Interest Rate Swap Mis-selling

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If you have had a million pounds’ worth or more of mortgages with a number of lenders, you may have entered into an agreement with Barclays to consolidate all your borrowings under a single commercial loan. Accompanying this agreement was a second contract called a hedge protection policy that should protect you if the interest rates change. However, in this recession, many Barclay’s customers have discovered that the hedging product they were sold was inappropriate for their financial needs, Consequently, a rise in claims for Barclays interest rate swap mis-selling is now occurring as clients become aware of the compensation they may be entitled to.

At Stellar Law, we have found many small business owners were not advised by Barclays of both the advantages and the disadvantages of how a loan and interest rate swap hedging agreement would work together, should the interest rates rise or fall. This failure to inform the customer is one of the key determinants in identifying Barclays interest rate swap mis-selling and, in particular, understanding the grounds for claiming compensation.

In reality, more often than not, the hedging product sold to the client was not appropriate for their financial needs, yet beneficial to Barclays. When approaching Barclays so as to raise finance for their business, the client was not informed of the alternatives available, and was only offered an interest rate swap hedge which, when interest rates fell, actually worked against their needs, rather than offer the protection it was supposed to. Inadvertently, the client could end up being an unknowing victim of Barclays interest rate swap mis-selling. And in this current economic climate, that is exactly what’s happened, with clients finding they have been tied into contracts that now serve Barclays, and not themselves. However, the good news is that in a large number of cases, we, at Stellar Law can prove that a clear case of Barclays interest rate swap mis-selling has occurred and the client is entitled to compensation.

A clear example of Barclays interest rate swap mis-selling is where some borrowers were advised to accept hedging products significantly greater in value than the amount they borrowed from Barclays. Alternatively, the borrower was asked to take out hedges that lasted for many more years than the repayment period for the loan; for example, a client had secured a loan for a 7-year term, but was provided an unconditional 15-year hedge. Consequently, this led to a situation where the client had paid off the loan whilst being left with a hedging agreement continuing onwards for years thereafter. This is an obvious example of Barclays’ interest rate swap mis-selling.

Unfortunately, it has been discovered that Barclays’ employees had been heavily incentivised to sell rate swap products, regardless of whether the hedging product was in the customer’s best interests. Therefore, it is reasonable to assume that any employee who is being financially incentivised, in the form of commissions, will be highly motivated to close the sale, as it were, and could override good judgement as to what financial product may or may not be in the best interest of the client. Inevitably, this can and has led to numerous cases of clients being the victims of Barclays interest rate swap mis-selling.

Similar to what has happened with the widespread mis-selling of payment protection insurance (PPI) in the UK and the subsequent compensation claims lodged by consumers costing Barclays millions of pounds, it is now clear that Barclays interest rate swap mis-selling is another example of the bank failing to ensure their employees were following their duty of care to their customers.

At Stellar Law, we have found that in many cases clients have been taken advantage of and Barclays has significantly failed in its duty of care to its clients. Where Barclays has failed to sufficiently explain the nature of a hedging product, offered several alternative products, or simply sold a product without accompanying easonable advice, or that was completely inappropriate, it would almost be certainly ruled as ‘non-compliant’ and a clear case of Barclays interest rate swap mis-selling.

It is on this basis, our lead council and barristers feel the client most definitely has a claim regarding Barclays interest rate swap mis-selling. If you are a client of Barclays and suspect you may have a claim, or for more information about Barclays interest rate swap mis-selling, please do not hesitate to contact Stellar Law today on 0800 774 7400.


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