An interest rate swap contract is an agreement in which one party (customer) agrees to pay a fixed interest rate in return for receiving an adjustable rate from another party (Bank).
During the key years of the hausing bubble, a large number of Banks' customers were led to sign swap contracts under the belief that they were getting an insurance to cover the increase of the interest rate.
But the mortgage rates' descent shown them that they couldn't take advantage of that descent because the swap applied and Bank charged them the difference between the fixed rate established on the contract and the applicable rate.
Over the last few months several courts have sentenced the nullity of swap agreements. The grounds for annulment are patent defects in the way that consent to the swap contract was given. In the cases sentenced, customers were not experienced in financial products, and Banks couldn't provide evidences that the proper advice about the agreement and required information were given to them.
The consequence of the annulment is that the parties are restored to their original positions, which in this case means that the Bank must refund the client any money charged pursuant to the swap agreement, plus legal interest.