As the complaints and compensations for PPI continues, now we found that FSA (Financial Service Association) has declared that many financial institution will have to pay compensations to qualifying business due to loss caused by interest rates products. Here is what you need to know.
First, the purpose of hedging products such as swaps, collars, structured collars and caps was to help small business owners set limits to rising or changes of interest rates within certain parameters, but these products didn’t help businesses when the interest rates fell.
Consequently, they are called mis sold interest rates. Thousands of businesses have been dramatically affected since the last years the interest rates for loans have been falling continuously. As a result, borrowers have ended paying more than they would if they wouldn’t have had these products by the time they got their loans.
What you need to do
Most people who were mis sold interest rates associated with swaps and collars —that give borrowers the ability to fix an interest rate or protect them against sudden changes of rates respectively— will most likely hear from their banks soon. If this is your case, then try to comply and cooperate with your financial entity as much as possible, giving the information requested and filing the claim appropriately.
However, if your business was sold a cap —intended to place limitations in the rising of interest rates — then you will have to consider calling your bank since by the fault, you are not being taken into account until you do the first move. It is worth a try since you might still get compensation if your business has mis sold interest rates of IRSAs (Interest Rates Swaps Agreements).
Really, the goal of these products was to protect your business against rising and changes of interest rates; however, if there are reasons to believe you have mis sold interest rates, then we urge to read and follow our advice.