Hitesh Patel describes himself now as “a former retailer”. He was developing a chain of stores, his main store being a substantial Londis in Rochdale. It was a mini-market doing £40K a week, an entirely viable business.
When financing the purchase of the store, his bank manager referred him to another department which, in a mere 15-minute telephone conversation, sold him (mis-sold him) a ‘structured collar interest rate swap’ as an insurance against interest rate increases. It was a condition of the loan and no risk was mentioned.
He had to pay the minimum interest for the first three years. To ensure this, the business agreed a three-year capital repayment holiday. As a direct result of the interest rate protection enforced by the bank, his interest payments were increased by 343%; a payment of £21,262.50 per year increased to £74,665.78.
The accumulative cash flow impact built up with frightening speed as his plans for expansion turned into a fight for survival by the last quarter of 2009.
He tried talking to the bank. “It would have cost me £300K for early settlement. I lost the whole business. The bank had threatened to shut me down and by 2011 I was worn out.” At this point the accumulative cash flow impact had risen to £148,000, with the bank, in an 18-month period, returning 138 items unpaid to suppliers and service providers.
He says: “It needs to be noted, the product sold was an investment product from Barclays capital; my relationship with Barclays retail was fantastic.”
Tesh’s complaints against the legality of the sale date back to 2012 when the Financial Services Authority charged the banks of serious mis-selling. It said that the product Tesh was sold should get full redress. But the reality was something different.
Tesh was offered £140K for interest payments made (swallowed up by legal costs). On top of that he was offered compensation to put him back into a position as if the hedge had never existed – to the tune of £38K. His business before they ruined it was valued at more than a million.
Not only did Tesh believe that the whole thing stunk, but also that the financial authority (now FCA) is in cahoots with the banks as it is self-regulating. He asks: “Why is it the wrongdoer gets to judge its own wrong doing, to have it approved by a party who is dependent on the wrongdoer for tens of thousands in income?”
He is suing Barclays.
He has also been busy inbetween setting up his own accountancy and business advisory firm ICSE (Independent Convenience Store Enterprise). “I developed it from scratch. I’ve built a business that I would have liked to have consulted when I was in the c-store business.”
His company has saved clients an average of 50-60% on their accountancy and VAT costs, and includes some of the country’s top independents. Check it out at icsedirect.com