Brothers lose rates swap case

A BANK has won a test case on the alleged mis-selling of an
interest rate agreement as part of a business loan.

Brothers Ruari and Jamie Stephen, who said their property development company went under because of an interest rate swap agreement (IRSA), sued Royal Bank of Scotland at the Court of Session in Edinburgh.

Similar actions were expected if the men succeeded, but Lord Hodge ruled yesterday the case should be dismissed as RBS had specified “certain limitations on our liability to you” in a letter to Grant Estates Ltd (GEL), and the bank had issued general “terms of business”, which had been signed by Ruari Stephen several months before the IRSA was effected.

The court heard that GEL, set up by the brothers in Elie, Fife, suffered financial problems in the economic downturn from about 2008 and RBS, from whom it had received a £775,000 loan, placed it into administration. It had taken out the IRSA to prtect against interest rate rises but the sharp fall in rates hit the company financially.

Lord Hodge said GEL could pursue its complaints before the Financial Services Authority.