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Business owner faces crippling £8k a month swap payments

A Lloyds Banking Group business customer who was sold an interest rate swap alongside a £2.3m loan is facing monthly payments of £8,000 for the swap and exit penalties of up to £800,000.

Mike Chadwick took out the loan from Lloyds in 2007 to finance property development plans on plots in Devon and Sheffield. He says the bank told him it would not be able to offer finance unless “protection” was in place. Chadwick took out the interest rate swap on £2m of the total £2.3m borrowed for a 10-year term.

Chadwick claims exit penalties were never mentioned. He says: “You have to question whether anyone would agree to a take out a £2.3m loan that cost £800,000 to get out of.”

Chadwick must pay nominal interest payments on the loan in addition to the monthly £8,000 cost of the swap.

He says: “It is not just the cash costs for businesses like mine, it is the worry. This situation has been a big worry for us.”

The case demonstrates the crippling costs faced by small and medium-sized businesses sold interest rate swaps by the banks.

Last month, the FSA agreed a settlement with Barclays, HSBC, Lloyds and Royal Bank of Scotland for the banks to pay “appropriate redress” to businesses missold interest rate swaps.

Since 2001, banks have sold around 28,000 interest rate swaps, which are designed to protect consumers against interest rate rises.

Chadwick has complained to Lloyds about the swap and his case is on hold pending the review.

Lloyds declined to comment on Chadwick’s case but says it has “assisted the FSA fully in relation to its review”.

Jacksons Wealth Management managing director Pete Matthew says: “This case indicates the sheer scale of the profits banks must have made on something allegedly missold across the board. It is a sickening betrayal of trust.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. More to the point, why aren’t people going to prison for this? What is it if it isn’t outright fraud? Small to medium businesses are the cradle of the economy so the bank’s actions are monstrously antisocial. Never mind messing about with the FSA – where are the cops?

  2. Like this individual I was sold £6m hedging by lloyds alongside property loans which are now costing me approximately £25k pcm and still have 6 years to go before they finish.

  3. As Barclays say, the FOS have found in the banks favour in 90% of cases. No wonder – iIn my case, the FOS refused to review whether HSBC had broken any of the FSA rules – either arrogance or ignorance. It is the FOS that needs investigating and if they had done their job properly, this scandal could have been sorted out earlier.

  4. I am loosing £8000 a month, can somyebody know how long it will take to come out of this misarable situation?

  5. Renata Jaruseviciute 26th November 2012 at 1:40 pm

    Dear All,

    I am doing a research on this at University of Greenwich and if you have suffered as a result of interest rate swaps being missold to you, please do not hesitate to contact myself. I just want to ask a few questions by email. If published, I hope the paper will also be used by FSA to refer to..It depends from you what information you would like to provide for my research. It would be great to get the copy of the loan application or terms and conditions, dont worry about your personal details. My email address: vitalco@ymail.com. phone no 07539301966. Thank you in advance

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