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Sussex firms fight banks over interest swaps
Hundreds of Sussex businesses that were sold unnecessarily complicated financial products could be in line for compensation. But experts say that the clock is ticking for firms to lodge their claims with the courts. Law firm Mayo Wynne Baxter represents businesses that bought interest rate hedging products (IRHPs) from the banks.
Karim Mohamed, a partner at the law firm, said the products were designed to protect businesses from interest rate rises in boom times, but when rates fell thousands of small businesses got tied into high rates and penalty fines.
He said: “Worse still, they face extremely expensive exit fees to get out of the arrangement. “Most products were bought to protect business mortgages and other big loans before interest rates fell in 2008. There’s a small window to get claims into the courts.”
Jeweller David Clark had to pay £160,000 to get rid of an IRHP he bought to protect the mortgage on his two shops.
Mr Clark, who runs W E Clark & Son’s jewellery shops in Lewes and Eastbourne, had to get another loan to pay the £160,000 exit fee. He’s now taking a compensation claim through the courts. The jeweller says other local businesses are in similar straits.
He said: “No one at the bank told us we’d have to pay a fee if we wanted to get out of the product, let alone such an enormous one. It was set in stone for 25 years and what business doesn’t have to change their financial arrangements in 25 years?”
“If we hadn’t been able to refinance, we wouldn’t have been able to expand our Lewes showroom last year. This created two more jobs that just wouldn’t have been possible if we’d stayed on high interest payments.”
“I’m president of the Lewes Chamber of Commerce and at least two more Lewes businesses are in this situation. “In fact it’s worse for them because they haven’t been able to get a loan to cover their exit fee. They’re stuck paying high interest rates at a time when the Bank of England is trying to support small businesses.”
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