Credit swap agreements
Credit swap agreements are hitting the headlines, and like most lawyers a number of companies have been ringing up to see whether they can do anything about the disastrous financial arrangements they have taken up with their banks. And who can blame them? These days almost everyone is submitting claims for being mis-sold the payment protection insurance they had to take out with their loans, and banks are falling over themselves to part with the money.
For credit-swap complaints, the attitude can be very different. Why should we compensate you, they ask? We had a deal where the interest rate would be fixed, so you would have benefitted if the rates had gone up, and now you are just sore because they didn’t. Well didn’t they just. Interest rates were at a high point just before the recession hit, and have been on the floor since then. Many companies will have the unworthy suspicion that large financial institutions had a shrewd idea that the direction of travel was down - or at least a better idea than the average business - and this is why they were keen to press these deals on their customers.
The main grievance companies have is that they had little choice about going in and none about coming out. Loans were just not to be had without a credit swap arrangement in place – to protect them, of course – and there were then swingeing penalty clauses if they tried to get out of the arrangement.
Earlier this year the FSA agreed a scheme with the big four so that smaller businesses – “unsophisticated customers" – can recoup their losses. This means those who score 2 out of 3 on these questions - Turnover less than £6.5m? Balance-sheet less than £3.26m? Less than 50 employees? – stand a good chance of getting compensation without going to court. By this measure, and of course many others, Wolferstans is sophisticated.
So, larger businesses still need to sue the bank for negligence – i.e. for a breach of their duty of care to advise properly on the risks. This can be an expensive and far from straightforward task.
One problem concerns time limits, as there is a six year rule for bringing such a claim and many of these agreements were taken out before the downturn in 2007/08, so time may be short.
If you have a concern over a credit swap agreement taken out in the heady days before the recession, please contact Rebecca Mabelle on 01752 292308 or email firstname.lastname@example.org