• Civil & Commercial Fraud & Trusts Disputes
• Financial, Banking & Hedge Fund Disputes
• Insurance & Reinsurance Disputes
• Interest Rate Swap Mis-Selling Claims
• International Arbitration
• Partnership, LLP & Corporate Disputes
• Professional Negligence
• Trade, Commodity & Maritime Disputes

Interest Rate Swap Mis-Selling Claims

Since 2010 we have seen an increasing number of complaints raised against banks over the mis-selling of interest rate hedging products. Many of the complaints are about mis-sold interest rate swaps, ranging from "plain vanilla" swaps to more exotic derivatives. We are recognised as one of the leading claimant law firms with expertise in this field. We have a specialist team dedicated to dealing with the mis-selling of interest rate protection products by the banks.

The independent legal directories have consistently ranked the firm as a leader in the field of Banking Litigation (for more details see our Financial and Banking Litigation page). The partners in the firm's interest rate swaps team are also recognised in those directories as leading individual lawyers in the field. We are one of only a small number of firms to possess substantial experience of acting in complex litigation against the banks and with a proven track record of doing so. Our focus is on dealing with the higher value swaps claims, where the sum at stake is more than £300,000.

Media coverage

It is now clear that a number of retail banks have been involved in mis-selling these financial hedging products on an industrial scale. There has been considerable media, regulatory and political attention given to this matter. In particular a series of articles has been published by the Daily Telegraph commenting on the matter and there have been BBC reports on swap mis-selling. Links to all of the media coverage of this area can be found on the Bully Banks website, which is a useful source of information on the mis-selling of swaps.

Cooke, Young & Keidan partner Sinead O'Callaghan has been quoted in Bloomberg in respect of the firm's work in relation to the mis-selling of swaps.

Further, the firm is presently acting for Graiseley Properties and other companies which are part of the Guardian Care Home Group, on a high value (approximately £36 million) High Court claim against Barclays, in what is one of the largest swaps cases to so far hit the courts.  The Daily Telegraph has commented on this case in a number of their reports.

Track Record 

We work with the leading barristers, as well as with specialist financial experts in this field and are currently advising a number of clients with property portfolios and substantial loan facilities, on litigation against the major high street banks. The banks' standard initial response in these cases - apparently irrespective of the merits - tends to be to deny the claims and some of our cases are therefore the subject of pending or commenced High Court litigation.

However, the fact is that a number of our cases have already been settled by the banks, who on the whole tend to give the appearance of mounting a robust defence, only to then settle the claims prior to trial. Documentation damning to the bank’s position, often comes out at the “disclosure” stage of the litigation. Such documentation can serve to demonstrate, for example, that the banks knew they were misleading or mistreating their trusting customers and can reveal the significant profits that the banks were immediately booking upon making sales of the products. The banks routinely insist on confidentiality, which prevents us and our clients from disclosing the terms of settlement achieved.

The products and how they were mis-sold

The types of derivative products on which we have advised include:

- Interest rate swaps – including vanilla swaps, multi-callable swaps and libor and base rate swaps

- Interest rate floors, caps and collars

Typical examples of matters giving rise to justified complaints include:

• mis-matches between the underlying value of the loan and the interest rate swap, with customers being sold swaps which far exceed the term of their underlying borrowing, or where the notional amount of the swap is far in excess of the actual borrowing (or in some cases both);
• substantial mis-matches between the length of the loan facility and the length of the swap product coupled with insistence by the bank that the customer enter into the interest rate hedge as a condition precedent of the lending facilities;
• customers being forced to continue with the interest rate hedges in order to maintain their current lending facility upon renewal;
• banks failing to explain to their customers the extent of the exit or breakage costs of the swaps and failing to ensure that the derivative products offered meet the needs of the customers;
• breaches by the banks of their duty of care to customers coupled with negligent (and sometimes even outright fraudulent) misrepresentations by the banks as to the nature or effect of the products sold; and
• failure by the banks to comply with their regulatory obligations under the FSA Conduct of Business Sourcebook (COBS).

Bank customers who consider they may have been mis-sold these financial products should seek legal advice without delay. Banks are likely to argue that mis-selling claims are time-barred 6 years after the date of the sale of the financial product which is the subject of the complaint. Therefore, customers with valid claims would be well advised to ensure they have commenced court proceedings in advance of that time.  Additionally, the banks may conceivably try to argue that a right to cancel the swap agreement is lost if there is significant delay in notifying the bank of the claim for cancellation.

Funding of cases 

In appropriate cases, the firm may be willing to act on the basis of a “conditional fee agreement” (CFA), where the firm backs its judgment by staking a part of its fees on achieving success in the case. However, given that these cases tend to settle, it is important to be aware that this method of funding has its potential downsides and this is something which clients should discuss with their lawyers before entering into such CFAs.