Over 60,000 fixed rate or tailored business loans holding embedded derivatives or ‘hidden swaps’ have been sold to SMEs by major banks such as RBS, Barclays, Lloyds, and Clydesdale. One of Britain’s biggest high street banks is facing a multi million pound legal claim from SMEs over ‘mis-sold’ loan allegations.
Vedanta Hedging assists SMEs to provide transparency in hedging. We have helped more than 65 Clydesdale & Yorkshire Bank customers to challenge their ‘hidden derivative’ TBL loans. We have also acted as a High Court CPR35 Expert Witness in several of these disputes. Abhishek Sachdev, Chief Executive of Vedanta Hedging has also provided live evidence to the Government on this specific issue which can be seen here.
The Financial Review reported, Clydesdale Bank ‘mis-sold’ thousands of fixed interest Tailored Business Loans to small businesses between 2002-2012.
More than 8000 TBLs contained hidden interest rate swaps which were not disclosed to customers, who thought this was a means of protection against the impact of potential high interest rates.
When interest rates crashed, TBL customers suddenly found themselves being charged interest repayments up to three times the bank’s variable rate. Furthermore, customers were and often still are unable to cancel the agreement without paying huge breakage costs. With one Clydesdale customer stating that their loan faced a breakage cost of up to £200,000 on a loan of £1 million.
The parliamentary inquiry report, released in March 2015, said Clydesdale Bank had ‘mis-sold’ TBLs to small business owners, which “led to considerable consumer detriment” and “this gap in the regulatory perimeter meant that the product created by Clydesdale Bank was not covered by the usual safeguards … Some [customers] were probably unaware that the product fell outside the scope of FSMA [Financial Services and Markets Act].” It said regulators had been powerless to provide redress to those affected by wrongdoing.
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