William Fox Bregman
Partner, Solicitor & Head of Banking and Finance Litigation
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Date Published:14 Jul 2016 Last Updated:28 Jul 2021

The Fixed Rate Business Loan Scandal – Make a claim before it’s too late

Banking & Finance Litigation

The Products and the Banks:

The FCA has confirmed that over 69,000 Fixed Rate Business Loans or Tailored Business Loans (TBLs) were sold by major banks between 2005 and 2015. Many of these loans were mis-sold and thousands of customers are yet to claim the redress to which they may be entitled. The scandal of the mis-selling of these loans is therefore likely to be even bigger than that of the standalone Interest Rate Hedging Product (IRHP), of which there were around 40,000 products sold.

Both Fixed Rate Business Loans and Tailored Business Loans contain a hidden or “embedded” hedging product as part of the loan agreement itself. For this reason, Fixed Rate Loans constitute Commercial Loans and were not within the remit of the FCA Independent Review into IRHP mis-selling. The offending banks have exploited this regulatory loophole by misleading customers and failing to disclose the terms of repayment, the liability of customers in the event of a fall in interest rates or the magnitude of breakage costs of the loan agreement. While no independent FCA Review is available for Fixed Rate Loan customers, we can assist you by pursuing other avenues for redress.

Further developments:

Since the scandal of fixed rate loan misselling became publicised in July 2014, campaign groups have been growing in opposition to the conduct of the banks. Bully Banks is seeking to persuade the FCA to launch an independent Review into Fixed Rate Loan mis-selling by working alongside MPs and SMEs which were mis-sold the loans. No Review into Fixed Rate Loans has been confirmed as of yet.

Some of the major banks have also been found to convert overdraft facilities into fixed rate loans without notifying their customers, again exposing them to the costs of breakage / repayment fees and the risk of a fall in interest rates.

Business Support Unit Claims and GRG Claims:

It has become clear that the misconduct of the Banks has extended beyond the initial mis-selling of the loan itself. Many businesses which suffered losses as a result of the mis-sold fixed rate loans or TBLs would later be transferred to a separate division of the Bank under the pretence of receiving specialist financial support and/or treatment from the bank in order for the debt to be satisfied. In reality, it has been exposed that these supposedly specialist divisions were established by the Banks in order to drive financially distressed firms into insolvency and facilitate the acquisition of their assets.

Further to the Tomlinson Report which exposed the mal-practice of the Global Restructuring Group within RBS (GRG), it is understood that the FCA may announce an independent review into the conduct of GRG later this year. We will be assisting clients with complaints through the GRG Review process should it materialise.

Time Bars:

It is critically important that you do not rest on any potential claim you might have against the Bank for the mis-sale of a Fixed Rate Loan because claims can become “time barred” and your right to recover losses may be lost. Whether a claim is time barred will depend upon the date of the Loan Agreement and/or the time at which you became aware that the loan was causing distress to your business.

How Ellis Jones can help you:

We have a long established Banking and Finance Litigation department which has handled over 150 complaints into mis-sold loans and has recovered over £38m in total redress for our clients since 2012.

First of all we can assist you in assessing the merits of your claim against the Bank, the scope for claiming consequential losses and the limitation date for making a Court Claim.

If Court action is not the most appropriate avenue for pursuing redress, we can assist you with a complaint to the Financial Ombudsman Service or an internal complaint with the Bank as an alternative.

Should you believe that you have been mis-sold a Fixed Rate Loan or are paying breakage fees for your loan which are in excess of 1% of the outstanding debt, please do not hesitate to contact the Partner in the Banking and Finance Litigation Department, William Fox Bregman, on 01202 52533 for advice.