Fixed Rate Loans (‘TBLs’) are a packaged financial product sold to businesses as an alternative to a business loans with variable rates of interest (LIBOR or base rates) and a separate hedging product such as a swap.
TBLs are not regulated as the hedge is embedded in the product, however TBLs have identical risks to those associated with a loan as a separate Interest Rate Hedging Product (IRHP). These risks were not explained to the borrower, including some or all of the following omissions;
It was not explained to the borrower that there was a swap embedded into their loan
Potential break costs were not disclosed, despite the risks that these might be substantial.
Often the bank’s sales personnel did not understand the products they were selling, yet they were highly incentivised.
Presentations were selective in the information provided, for example focusing on interest rate rises and thus demonstrating only situations where the client would benefit from the product.
Redress could still be possible despite the redress scheme not applying to TBLs. AHV have the necessary expertise to both analyse and value any fixed rate loan product, and the valuation of certain TBLs can be provided free of charge and on a regular basis. Simply subscribe to this service for regular valuation updates by email.