Think you’ve been mis-sold an unsuitable interest rate swap or insurance policy? You may be able to claim up to £100,000 in compensation as Chaman Salhan, chief executive of legal firm 2ndOpinionNow, explains…
The PPI scandal was the UK’s most expensive mis-selling furore of all time. But while bank customers retrieved around £30bn in compensation for mis-sold payment protection insurance, many business leaders are probably unaware that they can claim money back, too – for having been mis-sold unsuitable financial products…
The classic scenario is a firm which has taken out a £1m company loan, payable over 10 years. The bank or financial institution has provided the loan because it could be used for investment – say, workforce expansion or buying premises. But it insists the loan will only be given if you buy a hedge against the interest rate.
Last year, the Financial Conduct Authority [FCA] estimated some 30,000 interest rate swaps had been sold to SMEs since 2001. You may be able to claim this money back from institutions that lent them. Increasingly, companies have been sold inappropriate life policies and other insurance. The financial institution will say: “We’ll give you a loan, but you must take out keyman insurance in case the business’s main rainmaker dies. By the way, we offer keyman insurance too!”
If you think you have been mis-sold a product, it’s worth considering action, particularly as you are duty-bound to shareholders, as it could bring money back into the business. The time is ripe. In 2013, nine banks agreed to compensate victims of the mis-sale of interest rate swaps and other inappropriate products.
How to claim
If IoD members have purchased ill-suited financial products, what recourse can they take? Well, not only can you claim for the money you’ve spent on the products, but you can also make a case for additional lending costs, any consequential loss as a result of what’s been sold, plus interest. Companies can claim if they believe they’ve fallen foul of the following:
Breach of advisory duty. Here, you’d argue there was a duty on behalf of the financial institution to provide advice and recommendations suitable to that particular customer, using reasonable skill and care. Many banks will say: “We’ll only give an overdraft if you take out a life policy.” So, they’ll advise on life policies without looking at their suitability to you, maybe suggesting other products ‘necessary’ for you to take out.
Breach of common-law duty. Financial institutions should have taken reasonable care in providing information fully and accurately.
Breach of suitability. Is it something suitable to that individual or company? The financial institution has to talk in a way that makes clear there are other products on the market, not just theirs.
Financial institutions won’t, however, fold over and say, “Here’s your money back.” You have to substantiate your claims. Firstly, you need to determine if ‘advice’ was given or not. Many financial institutions will try to wriggle out of this by getting into a factual dispute about whether they have imparted this ‘advice’. If they have, they should have used reasonable skill and care with their recommendations (under the Supply of Goods and Services Act 1982).
How 2ndOpinionNow can help
2ndOpinionNow is the UK’s only legal firm with a website allowing users to get a written barrister’s opinion on any legal problem. If you believe a lender has taken advantage of you, or if you need help before engaging with a bank, you can seek our advice – 2ndOpinionNow has a panel of 10,000 lawyers.
Many companies are understandably worried about the financial costs associated with bringing these claims, but firms can alleviate this by buying insurance against risks, or even creating a pressure group with other companies.
If you have spent £100,000 on an unsuitable financial product, it may be worth spending some money to see if you can claim it back. There’s also the ‘consequential loss’ issues. Let’s say you’ve spent £100,000 on a hedge swap. The interest payable on that may add another £10,000–£15,000 (not to mention pre-arrangement fees). It’s not just a matter of seeing if you can claw back extra cash – some companies have experienced serious financial problems or even folded because they believed these products would protect them.
This area of litigation is still in its formative stages. It’s definitely worth looking into.
Do you feel you’ve been sold an inappropriate financial product? Visit 2ndopinionnow.co.uk to see whether you can make a claim for mis-selling