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Dispute Resolution

Fixed Rate Business Loan Mis-selling

Fixed rate loans allow the customer to budget and protects him against interest rates rising.  Fixing an interest rate on a long term loan can be risky for the banks as they are at the mercy of fluctuating interest rates.

In order to protect the bank against adverse movements in the interest rate the bank hedges its risk. Hedging is a form of financial insurance the purpose of which is to safeguard the bank against high interest rates.

Several U.K. banks have sold fixed rate loans to business customers which contain ‘embedded hedging’.  These loans were typically for 5 to 15 years and the ‘hedging’ element will often be unknown or poorly understood by the customer until they attempt to refinance the loan.

In most cases a fixed rate loan contains a provision for a ‘breakage cost’ should the loan end early for any reason.  The breakage costs are generally high, as much as 30% of the outstanding amount on the loan.

The purpose of the breakage clause is to tie the customer into the full loan term and to discourage refinancing of loans which have been hedged by the banks at their cost.

Many Customers Were Unaware of  Fixed Rate Business Loan Hidden Costs…

Many customers were unaware of the breakage costs or of the scale of the breakage costs. Many of these products were sold by Clydesdale and Yorkshire Bank under the name Tailored Business Loan (TBL).

The Bank of Scotland simply sold these products as fixed rate loans with the only reference to breakage costs being buried within their standard terms and conditions.   The information provided at the time of the loan tended to be rudimentary and failed to alert the customer to the costs of early repayment of the loan.

This led to customers taking fixed rates for long periods of up to 15 years but in the belief that the loan could be simply refinanced before expiry of the loan term.  Fixed term loans which contained breakage clauses inhibited refinancing on more favourable terms.

Were You Mis-sold a Fixed Rate Business Loan…

If you have been sold a fixed rate loan, it is likely that you will be able to complain to your lender.  There are time limits for making complaints.

Ultimately the sooner a complaint is submitted to the bank, the less likely it is that the bank will reject the claim as coming too late.

Oraclelaw has successfully acted for a large number of clients who have complained about high breakage clauses. Paul Fairbridge has recovered over £6M on behalf of clients who were adversely affected by breakage clauses.

Many U.K. law firms will not or cannot lodge complaints against the banks due to them being conflicted. We are one of a small number of firms in the U.K. with the expertise to be able recover damages against the banks.

Get Advice on Mis-Sold Fixed Rate Business Loans Today…

If you or your business has a potential claim against GRG or other U.K. banks then you should contact Paul Fairbridge for an informal discussion and initial without obligation review. Claims against the banks can be carried out on a no win no fee basis.

Paul can be contacted on pf@oraclelaw.com or at 0141 332 0915.

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