Barclays Capital - Rate swaps.

[PokerPete62]

Hi All

 

Thank God it wasn't just me that has been duped by Barclays Capital and its IRS deal. We have just sent in our offical complaint to BarCap and are now waiting to see what happens.

Their big selling point to us on this IRS was the fixed rate of 5.63%, but they never explained the real rate we would pay would be nearer 8%.

You would expect a fixed rate to be a fixed rate deal, we have had our payments set at 4 different amounts.

If we have to sell our properties now and clear the outstanding balance we would still owe BarCap 250K as a penalty.

I would be glad of any advice and guidence in this matter

 

Regards

PokerPete

[slick132]

Hi PokerPete and welcome to CAG.

 

I hope one of the other contributors on this thread will stop by to assist.

 

8-)

[all2lgain]

Poker

 

That sounds like a deal they call a 'double-floor' - once the base rate hits a certain point, for every percentage point it goes down further, your rate goes up. Sound about right?

 

If the deal was before 2005 when the FSMA rules were completely removed then you may have a complaint, if it was after that then the rules allow the banks virtually a free hand.

 

Wait and see what happens with your complaint - nothing probably - see if they offer any sort of commercial deal.

 

I know some pretty big businesses who have been hammered by these deals.

 

A2G

[PokerPete62]

Had a reply from BarCap today, wanting to set up a meeting "without prejudice" to discuss commercial options available to me with respect to the Swap. Hmmmmmmmm. Is this a good or bad thing???

[all2lgain]

They will probably suggest restructuring the swap, in order to reduce your monthly payments.

 

Bear in mind that when they do this, they fix your debt (its often called a breakage cost) at that point, in doing so you wont get the benefit of the impending base rate rises. This is why they are now so willing to offer 'commercial deals' - if you wait and the rates go up, your swap payment will reduce and the overall value to them reduces.....whereas if they can set the breakage cost now, the overall value to them is the same.

 

The banks should be factoring in a rate rise when they put together their proposals to you, the problem is that there is no way that anyone can actually check their figures, apparently the formula are so complex no-one outside the bank is allowed to know it, in case they get really confused.....

 

Ask them if they have factored in rate rises, where they see base rate in 1 year, 2 year, etc etc, and then its up to you to judge if you agree with them - this is a straighforward casino product, no skill, just pure guesswork.

 

And remember.....as you already have a rate swap product, its a commercial deal, there are absolutely no restrictions on them, if they rip you off again....tough.

 

I cannot think of a less suitable product for anyone, ever.

 

If a broker negotiated your original deal, or an accountant, look for compensation under the FSA scheme.

 

Good luck.

[PokerPete62]

Thanks for the info A2G.

The original deal was recommended to us by our Relationship Manager from Barclays, it would be a good product for us. Unfortunately we didn't run it by our Financial Adviser, we were advised to either by BarCap.

We will have to see what they say

Cheers Pete

[all2lgain]

Tbh, your financial adviser wouldnt have understood it either.

 

Pre-2005 you couldnt be sold these due to their complexity and risk, as a result they were virtually unknown amongst investment professionals outside of certain activities.

 

The banks piled in in 2006 and they were a big seller for them - the so called 'no cost' element was used as a major selling point. No cost to get into, everything you possess to get out of!

 

Let us know how you got on with your meeting, pm if necessary.

[mikescott10]

Hi Our Barclays Relationship Manager did much the same. We wound up being 'sold' a complex product we did not even have the chance to read the papers. He just turned up one day and told us to sign them! Long story short we are tied to a complex product that has nothing to do with the original loan, and it is costing us £5,000 PCM the loan was £1.4M at base + 2% in August 2007 We had meeting and was offred a 'restructure' provided we offered more security! They have lost all the records of the deal being offered, and have produced Emails that we did not receive. We do have one saying '...the product you have bought...' we questioned this but never received any reply. It seems there is little we can do from the posts here, but if there are enough of us in the same boat? It worked in Egypt? Impercunious :mad2:Mike

[Katywilliams]

Barcap are an absolute disgrace and totally conned people into this product and then immedialtyl offloaded the risk into the market - up or down they make 20% margin for absolutely no risk - hence they simply didn't care about the risk .

 

I am gathering a list of people conned in this way

 

- no meeting

- no explanation of risk

- no explanation of breakage costs

- no due dilligence

 

I have threatened to sue and they are running scared. I borrowed £1m and they want £250,000 to break and is costing me £5,000 a month !!!!

 

I really do think they will settle .

 

Let's take collective action and cause maximum publicity,

 

There are 100's in The same boat.

 

If we can get 10 people together then we can share the risk.

 

Anyone interested ?

Edited February 19, 2011 by Katywilliams

[PokerPete62]

We have a meeting with BarCap on the 7/3/11. I think I meet 3 out of 4 points. I did have a meeting but none of the rest

[Katywilliams]

Good luck . I had mine - they send well trained people who simply tell you no one anticipated this and there is nothing that can be done . To be honest Barclays see this as an opportunity to make more money

 

- they let you break at a profit to them

- they lend you the money at a much higher rate

 

It's a disgrace and unless we take action they just walk over us

Edited February 19, 2011 by Katywilliams

[mikescott10]

Hi Katy

I agree, it is clear that there is strength in numbers. Bob Diamond pontificated in front of the Select Committee arrogantly telling them to stop bashing the banks, and now presides over a company able to get away with paying less than 3% tax on their published profit! I know life is not fair, but I have an absolute faith that for those who chose to receive it, there is a universal grace available to us all. We are with you in this fight for decency, and the very survival of our Children’s Day Nursery business, yes it is a partnership, and we could loose everything we have worked so hard for during the last 15 years, just like so many other posts on this forum. These are not just words, every post here represent the real lives of hundreds of people no longer able to sleep at night.

I am definitely in the ‘silver’ generation! I have an understanding of how social media works, but no idea how to use it! We should empower our children to try to find something to make this injustice ‘viral’ on the web and make Barclays sit up and listen. Our Children’s Day Nursery can not survive the onslaught of a ‘Business Development Manager’ in London and monthly charges of £5,000 to pay for a ‘product’ no one comprehends.

Mike

[mikescott10]

Yes!

[all2lgain]

You need to read the FSMA Act (2005 version - NOT the 2001 version which is most common on the internet.

 

I think you will be shocked - the banks have to prove 2 things:

 

they are an authorised body under that act

the salesman was authorised by the bank to sell them.

 

Thats all they have to prove. Full stop.

 

These products are virtually unregulated from 2005 - due diligence, expalnation etc etc - not a single one of these has to be covered.

 

Its a commercial deal , the onus is entirely on you to decide if its suitable or not.

 

The second point above is important - your relationship manager is unlikely to be authorised - normally they put you on the phone to someone from Barcap who actually does the deal, this is recorded.

 

Sorry to be negative, I'm genuinely on your side, but I have yet to hear of a single genuine case of a bank either being ruled against by the FSA, or by a court - I have seen several legal companies taking more money off people with promises of redress, and I'd love to hear of a success, but generally the way out is by negotiation, and this will have a confidentiality clause somewhere, hence none of the posters who have done deals talk about it anymore!

 

More than happy to be proved wrong!

 

A2G

[PokerPete62]

"Investigating your complaint

Your complaint will be investigated by a senior officer of the

Bank who is not directly the subject matter of the complaint.

In order to reach a fair conclusion we will review the relevant

information available to us.

We will endeavour to complete our investigation and reach

a conclusion as soon as is possible. The length of time this

will take will be determined by the complexity of the complaint

and the extent of the investigation required. In any event we

will report to you on progress as outlined below:"

 

This is taken from BARCLAYS CAPITAL CUSTOMER COMPLAINTS PROCEDURE, yet our complaint is been handled by the BarCap employee that sold us this product, this can't be right, can it?

 

PokerPete

[all2lgain]

Pete

 

Depends where in the complaint system you are, if its right at the beginning then its going to be a fishing expedition, they want to know if you have the basis for a mis-sale (almost certainly not), if they dont have anything to worry about then its time for them to get the calculators out and work out a 'restructure'.....see my previous comments as to who really benefits.

 

The next person up the chain of complaints will be their boss, who is of course impartial.....

 

Forget complaining, its a waste of time, you need to approach this as a negotiation - albeit you are at a disadvantage as you are already tied into a deal.

 

Good luck

 

A2G

[PokerPete62]

Hi All

Prior to 2007, when Barclays started pushing this product on to SMB's, who was this product sold too and why did they decide to push this to the SMB's. The banks had to know that interest rates would fall through the fall before they did, that is why they tied up so many SMB's to this deal so they wouldn't lose

 

Pete

[all2lgain]

Ok,

 

Prior to 2005, this particular type of over-the-counter derivative deal was only available to a specific list of investment professionals - the banks would get creamed by regulators if they traded with anyone else - the list is very specific and 'normal' businesses were not included.

 

This is covered by the FSMA ACT (2001).

 

In 2005 the dear old chancellor (remember him? anyone suffering from these deals should curse the man) decided to completely remove the restrictions on sale - the only proviso being that it is a commercial transaction ie a private person cannot take a rate swap.

 

Even this protection was really for the banks benefit - in a commercial deal both parties are equal in either knowledge or the ability to obtain knowledge, so mis-selling doesnt apply, however, in a trade with a private individual the bank would be at a disadvantage as the private individual, when they found they had been ripped off, could rightly say they could not be expected to have the same level of knowledge and would have to be compensated.

 

The new regs were in the FSMA Act 2005.

 

I tend to disagree that the banks knew rates would plummet - what has happened though is that some of them (Barclays in the main, but others as well) have found themselves holding some great deals and have profited beyond belief - its the success of these deals that got Mr.Diamond his job, but also got Barclays Capital known as Barclays Casino.

 

A truly dreadful product.

 

Regards.

A2G

[jbf]

Hi

I believe I was mis-sold a similar product from RBS. I am trying to negotiate with the bank now. I asked for a fixed rate loan but got a rate swap instead. I only realised when the extra payments started going out of my account.

[Madmountainman]

Hi

Hope somebody can answer a question for me. I have two £500k rate swaps as detailed in an earlier post. I have just noticed in my rate swap confirmation (which is the only paperwork I have received!) that it states

"In the event of the cancellation or expiration of the facility Agreement such cancellation or expiration will constitute an Additional Termination event under this Agreement with the Counterparty.

For the purpose of this Additional Termination Event the sole Affected Party shall be Counterparty and "Affected Transactions" shall mean this Transaction

What does this mean? Barclays have given me new loans rather than extending the facility so does this mean that I can terminate at no extra cost or does it mean as I suspect that Barclays have further stitched me in that I cannot get out of it but when interest rates rise above my swap they can get out of it?

thanks for your help

[jbf]

Hi MadMountainman

 

I am no expert. I just went on this site to let it be known there are lots of us out there with simailar problems about the way these rate swaps etc were sold. I have sought legal advice and am going to the FSO. I will post again if I get any useful information.

[Madmountainman]

Just heard from Barclays, seems that I do not have a hedge product after all, basically whilst interest rates are below my swap rate, I pay them. When interest rates rise above my rate they have the right to cancel the product rather than pay me!!!!

Surely Panorama should be doing a special on this?

[jbf]

Hi MadMountainman

 

I think we should all club together. The way we have all been treated by the banks is terrible.

[jbf]

Hi All

 

Does anyone want to protest outside the Royal Courts of Justice or Houses of Parliament? I am so outraged at how my bank (RBS) has treated me regarding this rate swap loan. Send me a message and I will arrange it.

[BARNSLEY 1]

I think that we tick all 4 boxes that you described:

 

No meeting: all communication with BarCap by e-mail or telephone

No explanation of risk: No risk warning notice, no ISDA Master Agreement sent, encouraged to believe that product advantageous in low interest rate scenario

No explanation of breakage cost: I was forced to break contract by Barclays when I sold the property; I had no understanding of potential scale of cost

No due diligence: Barcap did not assess the suitability of the product for my situation

 

I'd be interested to join forces with other similar parties to take action against Barclays.