Commercial Mortgages Interest Rate Swap Claims

legal Amongst those who signed up to interest rate hedging products such as “structured collars”, the news last summer that the Banks had agreed to review their sales of such products to small businesses was met with cautious optimism.

The outcome, earlier this year of the pilot review – which revealed 90% of a sample of 173 sales of such products to “non-sophisticated” customers did not comply with the FCA (formerly the FSA)’s regulatory requirements – was a further cause for optimism.

However, the review process is turning into a lengthy one and at the time of writing we have yet to hear any reported case in which the customer has received compensation under the FCA review.

In the meantime many customers are simply awaiting the outcome of the review with fingers and toes firmly crossed. This is a very risky approach. Whilst all will be fine if the Bank’s review culminates in satisfactory compensation being paid, if this proves not to be the case this delay could prove to be highly damaging to businesses wishing to pursue their claims.

In many cases, if the customer is dissatisfied with the outcome of the Bank’s review the method of redress will be court proceedings. There are strict time limits for bringing such court claims. Though the precise time limit will depend on the circumstances of each individual case, in most instances the time limit within which a claim must be commenced before being time barred is 6 years from the date when the agreement to purchase the hedging instrument was concluded.

Given that sales of these products peaked in 2007/8 many claims will already be (or will very soon be) out of time.

You can protect your position by commencing court proceedings (and then agreeing a stay of proceedings pending the outcome of the Bank review) or by entering into a relatively straightforward “standstill agreement” with the Bank effectively stopping the clock from running.

If you feel you have been missold a hedging product we would urge you to contact us as soon as possible (and certainly well in advance of the 6th anniversary of taking the product) to see if you ought to be taking such protective measures.

Legal Update provided by: hlw Keeble Hawson LLP, Sheffield – 0114 2906230