Libor loans & complaints

jamie11

_Andy_ wrote: »

So, given that you're clearly the authority on the matter, why are you bothering posting here?

That's just it, I am not an expert or an authority. That's why I'm asking.

robrooo wrote: »

Didn't this story break in the Summer? Basically small to medium-sized businesses who wanted a loan from their bank were told they had also to take out a hedging swap (sometimes with a cap or collar) to protect themselves from interest rate changes.

Generally this type of instrument has a fixed interest leg and a variable leg, linked to LIBOR. The LIBOR flows cancel out the variable loan rate and leave you with a fixed rate loan. The cap and collar adds trigger rates at which the hedge rate comes into force.

But of course you pay a premium for the privilege of buying the swap/cap/collar, and maybe the rate that you "bought" was not as good as the natural rate you might have got with no hedge, especially as interest rates have been very low for some time.

There were also allegations that the hedge amount was often inflated compared to the loan; that clauses in the swap agreement allowed the bank to cancel the hedge at any time, but not the borrower; that the period of hedging was longer than the lifetime of the loan; thus the allegations of mis-selling.

That sums it up to a certain extent.

The deal I was given, I was quite happy with...until I asked for a figure to pay it off, I knew about the early repayment charge of 1% I had no problem with that but there were also some administration charges etc written into the contract, no figures, just a clause. When the figures were sent to me I found they wanted £30K more on top of their repayment.

Not really understanding this I set about raising it, well eventually I did raise it, the full outstanding amount and enough to pay those charges, so I asked for the figures again, this time when they sent them they were demanding an extra £60K on top of the repayment figure, since I hadn't arranged for that much I had to drop it and stay with them. That cost me a lot of money. They said it was to do with the LIBOR

Please don't think I'm whining here, I have no trouble servicing this loan, it has however served it's purpose and I want to get rid of it. The banks have been caught out again, the FO is finding for people in my position and ordering them to compensate for the losses they have [STRIKE]made[/STRIKE] caused.

That's why I posted this thread, if you understand the question then please contribute, if you don't understand it then feel free to post but don't make comments about what is a very serious matter for me personally.

dunstonh

With the libor issue, if anything, consumers benefited as the rate was depressed. However, busineses could have suffered.

http://www.ftadviser.com/2012/07/03/mortgages/mortgage-data/libor-fixing-beneficial-for-mortgage-borrowers-4OL1kb3UxYoN3Mt93eJ9wN/article.html

the FO is finding for people in my position and ordering them to compensate for the losses they have made caused.

Can you give a link for a published case that has done this as I havent seen anything in the FOS publications yet to suggest they are. I suspect they are not doing that because until the LIBOR issue is investigated and the FSA publish their findings and instructs the lenders one what to do, the FOS will withhold any decisions until then. The issue of whether any UK retail borrowers were affected is still unknown. To suggest that the FOS have ruled on cases on a subject this complicated after such a short a period and whilst investigations are still going on and prosecutions undecided is pushing it.

http://www.ft.com/cms/s/0/2d345e04-c1e2-11e1-b76a-00144feabdc0.html#axzz2EjkmWecb