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Interest Rate Hedging Products – a guide for accountants, Insolvency Practitioners and lawyers

Professionals working with small and medium sized businesses have important roles to play in supporting clients who have been mis-sold interest rate hedging products (IRHPs).

Accountants

If a business owner gets a letter inviting them to take part in a review of their swap product, their first port of call for advice may be their accountant.  We received a call from a business owner who was expecting representatives from their bank to visit them for a ‘fact-finding meeting’. Luckily their accountant had advised them to contact us before allowing this meeting to go ahead, because the client had misunderstood the nature of the mis-selling and if they had gone ahead without our advice would very likely have prejudiced their case.

Later in the process, accountants have specific expertise in determining the consequential losses to the business as a result of the mis-sold swap product, but during the review itself we would always recommend that business owners have access to advice from specialists in hedging products and the regulatory framework surrounding their sale.

Insolvency Practitioners

Soaring IHRP costs could be one of the contributing factors to a company going into administration. Redress could make the difference between insolvency and rescue. Some of the sums awarded run into millions. For example, Barclays recently offered £1.5 million redress to Bill Haslam, a holiday resort owner and director of campaign group Bully Banks.

Where a company in administration has been sold a qualifying swap product, the IP may receive a letter inviting them to opt in to the review. IPs do of course have a responsibility to ingather the maximum potential assets for companies in administration and their creditors, while balancing the likely cost of doing so. Seeking expert advice on this complex issue at an early stage could minimise costly mistakes and maximise the chances of a successful claim.

Lawyers

It is understandable that businesses may turn to law firms to represent them in cases of IRHP mis-selling. However, the success or otherwise of the legal route is far from clear. Two very high profile cases, Grant Estates Ltd vs RBS and Green & Rowley vs RBS have been won by the bank. Veritas Treasury believes that the legal route can be an option in some cases, but for the majority, the FCA review should be the first preference. The review will not focus on the legalities of the contract but on the compliance of the sale, so access to expertise in banking compliance is essential when supporting a client through the review process.

More information on IRHPs:

Accountants: Seeking Redress for Mis-sold IRHPs (from CA Magazine) and Mis-Selling Myths (from CA Magazine)

Insolvency Practitioners: Interest rate swap mis-selling - what IPs need to know (from Impecunias Magazine)

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