The UK has been left reeling from a number of financial mis-selling scandals for a while now, including many cases of mis-sold business loans.
According to a KPMG report, these mis-sold loans have caused the UK’s largest banks to pay out about 60 percent of their profits to customers seeking compensation.
And there seems to be no end in sight, as more and more people become aware of this particular type of financial mis-selling.
If you believe you have been mis-sold a business loan and are eager to seek redress, this guide will show you:
How to identify if you were mis-sold a business loan, what steps you should take to start a claim, the time window you can claim within, and what to do if the loan company has gone out of business.
What Counts As A Mis-sold Business Loan?
This means that whilst signing up for a business loan, you were also persuaded to buy a product that was supposedly meant to shield you from an increase in the interest rates of bank loans.
When these products, known as interest rate swap agreements (IRSA), are sold to the right customers, they do protect against fluctuations in interest rate changes.
However, when they are sold to businesses that may lack expertise in that area, e.g. small and medium enterprises (SMEs), it can leave them worse off when fluctuations in interest rate changes occur. And, when you consider SMEs make up 99% of all UK businesses, you can see this is a substantial problem to many.
What Are The Types Of IRSA?
According to the Financial Conduct Authority (FCA), there are four types namely:
- Swaps: This allows customers to set their own interest rate.
- Caps: This places a limit on any rises in interest rate.
- Collars: This protects customers from fluctuations in interest rate within a specific range.
- Structured collars: This allows customers to limit fluctuations in interest rate within a specific range but leaves them exposed to rise in interest rates.
A significant number of small businesses who bought one of the above products claim they were not properly advised about the risks involved. In addition, some reported that the banks implied they wouldn’t accept their loan request if they didn’t also buy one of the IRSAs.
Both of these scenarios could be considered a valid example of financial mis-selling and warrant a claim for compensation.
What Should I Do If I Have Been A Victim Of A Mis-sold Business Loan?
You may choose to seek compensation yourself, or you may wish to consider legal representation to help you instead. If that is your preferred option, you can set up a no-obligation chat with a claims advisor here.
However, if you decide to begin the claims process yourself, we suggest the following steps:
1 Collate All Relevant Information
The first thing you will need to do to seek redress, is to ensure you have all the relevant information detailing the mis-selling of the business loan.
What did your financial provider tell you about the loan? Who was the person you interacted with throughout the process of securing the loan? Where and when did it happen?
Write down everything you remember
Let your narration be concise and clear. Also, it is important to stick only to the facts, so keep out any extraneous information that neither adds to nor detracts from your written account.
If you have got any written proof or similar relevant documents, include them as part of your evidence.
You can also request your financial provider to grant you information detailing the transaction. To achieve this, you need to tender a Subject Access Request (SAR) to them if your business is a partnership or sole proprietorship. Or a Request For Information (RF1) if your business is something else.
Once they receive your SAR or RFI, they are legally obligated to release the documents they hold concerning your dealings with them.
When you get these documents, they should confirm the exact details of your loan, i.e. its amount, condition of lending, length, type, etc. In addition, they should help determine if you were mis-sold the loan.
Do remember that the foundation of your case and how strong it will be, will depend on the information you have at your disposal. So don’t underestimate the importance of this first step.
2 Make A Complaint To Your Financial Provider
Now that you have gathered all the necessary information to prove that you were a victim of a mis-sold business loan, it is time to speak with the financial provider responsible for the loan.
Get in touch with the company and ask for a copy of their internal complaints process. It is this copy that will tell you who you should contact to make your complaints. In the absence of this copy, simply go to their website and get the information from there.
The complaints process will lead to a series of back and forth contact between you and the company. With this in mind, it is important that you keep a detailed log of the entire process in your personal records.
Write down the date you initiated proceedings with the company and subsequent dates thereafter. Record the number of times you called, the names of persons you spoke with, what was discussed, and the actions, if any, that were taken.
These records will leave a trail of evidence if you decide to further pursue your compensation claim.
Be aware that the company has eight weeks to respond to your complaints, and you might have to wait a bit longer if they are being helpful.
Ensure you exercise patience during the proceedings. Nonetheless, if they fail to get back to you within this time frame, or you are unhappy with the result, then you can contact the ombudsman service.
3 Get The Ombudsman Service Involved
If the financial provider fails to reply, or responds to your complaint, and you are still dissatisfied with their decision, the Financial Ombudsman Service can help.
This service is independent and only available if you had earlier followed your financial provider’s complaints process. In addition, the ombudsman service is free, so you don’t need to pay anyone to lodge your complaints with them.
However, you will need to be patient when the ombudsman is investigating your claim, especially if the mis-sold business loan happened some years back. As it could take a while to contact the people involved with it and also find the necessary files.
Usually, the law gives you a duration of six months, starting from the date you received the final response of the company, to contact the ombudsman. Once this time limit is exceeded, you will not be eligible to use the services of the ombudsman.
For most people, the ombudsman is the last resort where everything ends. But if you are not happy with the decision of the ombudsman, you can head to court.
4 Raise The Matter In Court
If you are resolute about going to court, you will need the services of a claims advisor or solicitor familiar with mis-sold business loan cases.
He/she will go through your business loan contract to identify any flaws or breach in it. It is advisable that you go along with all the paperwork you have garnered, so your lawyer can discern if you have a strong case or not.
Still, remember that court cases can be quite costly and drag on for a long time. So be sure that this is the best course of action for you before consulting a lawyer, or ensure they are willing to represent you on a no-win no-fee basis if you cannot afford legal fees.
How Much Compensation Should I Expect?
It is difficult to know the exact compensation amount you could claim, as they vary depending on the specifics of each individual case.
Nevertheless, a resolution could include using a simpler or more suitable alternative to replace the existing product or cancelling the product without incurring any fine. Also, you could be entitled to financial compensation, such as a full or partial refund of the product.
The Firm That Gave Me The Loan Has Gone Out Of Business – What Should I Do?
You could still be eligible for compensation from the Financial Services Compensation Scheme (FSCS) even if the firm that mis-sold the business loan to you is no longer in operation. But the firm must have been authorised by FCA at the time of the loan, before you can further pursue compensation with the FSCS.
I Went Out Of Business Because Of These Loans – Can I Still Seek Redress?
Yes, you can take legal action against the financial provider responsible for the loan and also file for compensation. However, you will most likely have to solely bear the legal costs.
Mis-sold Business Loan: Conclusion
There is no reason why your business should suffer from the inability of your bank to do things the right way and ensure their customers are given the correct financial advice. So don’t hesitate to claim compensation if you believe you were a victim of a mis-sold business loan.
Not only will your case throw more light into an unravelling situation, but it will also provide you with the financial relief and recompense you deserve.
Feel free to contact a claims advisor here if you wish to discuss your case further. They can assist with your claim from the beginning if you prefer someone with legal experience to pursue compensation on your behalf.