Illustrative Case Study 3

Consequential loss: allSquare reclaim £75,000 for Fitness Club Developer

Mis-sold Financial Product: Base Rate Collar
Bank: National Westminster Bank (NatWest)
Business sector: Fitness & Leisure
Appeal outcome: FCA Review Scheme – Alternative hedging product proposed (Cap)
Appeal time: 2 months
Claim outcome: Basic Redress: £205,000.
Consequential Loss: £75,000.
Total Claim: £280,000

In 2006, our client took out a loan with NatWest (Royal Bank of Scotland) for £2.15 million for 15 years. The purpose of the loan was to refinance existing indebtedness and repay overdraft facilities at the Fitness Club they owned.

As part of this lending arrangement, NatWest suggested they enter into an Interest Rate Hedging Product. They were subsequently sold an amortising base rate Collar with a Cap rate struck at 6.5% and a Floor Rate at 4.5% on 50% of the amount of the loan over 10 years.

As the Bank of England reduced Base Rates in 2009, our client found that their monthly payments under the Collar increased to £3,000-£3,500 per month. At the same time, the business started to see a downturn in trade with falling membership numbers and income.

Having been included in the Financial Conduct Authorities Interest Rate Hedging Product Review Scheme, the client was found to have been mis-sold the Collar which resulted in the cancellation of this hedging product – replaced with a cap at a fixed monthly cost of £340.

The offer of Basic Redress of £205,000 consisted of £165,000 and compensatory interest of £40,000. Unhappy with the amount of Compensatory Interest offered and after an initial call with our in-house Forensic Accountant, our client decided to pursue a full Consequential Loss claim and reject the bank’s offer of Compensatory Interest.

allSquare worked with the client to obtain the necessary information to help build the Consequential Loss claim. Over a period of 2 months, we were able to identify that there was a strong Consequential Loss claim that exceeded the amount of Compensatory Interest that the Bank had offered.

The Consequential Loss claim included the following:

Loss of profits suffered

Our client is submitting a claim for the profits that they would have made if they had not made the net payments under the Collar totalling over £164,000; but had invested the funds in the business to refurbish the fitness club. This would have resulted in increased turnover and profits thereafter.

Furthermore, our client had developed a business plan to reverse its falling membership, turnover and profits which it was unable to pursue as a direct result of the payments it was required to make under the Collar.

Professional fees

Our client will have incurred professional fees including legal fees, accountancy and forensic accountancy fees in order to collate the consequential loss claim. We are looking to get these professional fees refunded.

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