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Interest Swap Rate Agreement

Tailored Business Loans


The FSB is concerned members may have been sold inappropriate loans with embedded derivative products – known as ‘embedded swaps'.  An ‘embedded swap' or ‘tailored business loan' is different from an ordinary swap as it looks like a normal fixed rate loan to the borrower but incurs disproportionately high break fees if interest rates fall, not disclosed to the lender at time of sale, or hidden in technical or legal documents. 


Around 60,000 of these products have been sold according to the financial regulator, and while many will be legitimate we need to find out if any have been mis-sold. The FSB's efforts with Government are only effective because they are based on evidence from our membership.

If you are a member, a free telephone consultation is available with Vedanta Hedging. Please email Nadia Patel or Abhishek Sachdev  with your membership number to arrange. 


IRSA mis-selling

In June 2012, the Financial Services Authority (FSA) found that many firms had been mis-sold complex financial products – IRSAs. It estimated that around 40,000 products have been sold and that these firms were due redress. The FSA examined the extent of the mis-selling and announced that 90 per cent of these complex products were mis-sold, often to the very smallest of businesses.


What is an IRSA?

An IRSA is a financial product taken out against a loan or mortgage to help protect against rises in interest rates. The products were sold to all types of small firms, with the majority sold between 2006 and 2009.


What did the FSA review find?

The FSA review found that 90 per cent of the products sold to small firms were mis-sold - so the business was not provided with clear information about what they were buying into and the potential risks associated with it.


What next?

The FSB called for an independent process for small firms to get redress. The FSA has tasked the banks with reviewing each case, overseen by an independent adjudicator. Each of the banks must now write to each of their customers that have had a product. HMRC has provided guidance on how redress payments from the banks under the FCA-led review of sales of Interest Rate Hedging Products (swaps) will be treated for tax purposes. The taxation implications of compensation in respect of these products for business differ significantly from the position for private individuals in receipt of PPI compensation. You can find more guidance here.


The FSB believes that some firms may benefit from advice and is working with three companies to provide professional guidance and support to access redress for its members. Their charges will vary and it is up to the business if they want to choose to take advice or bring the claim directly against the bank through the FSA's compensation scheme.


If you are a member to access redress you can call one of the following companies with your membership number:


Slater & Gordon 0808 175 8105 


Brian Hurst, 39 Park Square Chambers 0113 245 6633


Mayo Wynne Baxter Solicitors 01273 775533



The FSB acknowledges there are other respected firms offering similar services and the list is intended as an example not as a recommendation. All businesses should be aware there have been some claims lost even though they have been supported by a solicitor so it is extremely important to make the right choice of legal partner to support your claim.