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Mis-selling Myths

In our work supporting accountants and their clients with interest rate swap mis-selling claims, we have heard many assumptions made which are incorrect and could damage your client’s chances of receiving redress. In this article, we take the opportunity to demystify the process and explain the truth about interest rate swaps and the FCA review.

My client wanted to fix the interest rate on their loan so the swap wasn’t mis-sold. 

A property developer received a letter inviting him to a fact-finding meeting about a swap product he’d been sold. He wasn’t too concerned about it because as he told us, ‘I was happy to look at fixing my borrowing rates, so I don’t think it was mis-sold’. Luckily his accountant advised him to contact us. We found that the product he was sold was far too complex for his needs, exposed him to too much risk and the break penalties had not been explained to him. On our advice he cancelled the meeting and opted to be represented by a written statement we produced for him.

If my client makes a claim for redress, it will damage their relationship with their bank.

Although business owners who contact us are often concerned about this, in our experience, there’s little to fear. Those who carry out the review are a long way removed from the client’s Relationship Manager. One client even found that her Relationship Manager actually suggested she pursue the FCA review because redress might improve her current financial situation.

The fact-finding meeting is with representatives from the FCA.

While there’s no suggestion that banks have misrepresented the meeting, we have found that some clients assume that because the review was ordered by the FCA it will be carried out by the FCA. Not true. The meetings will be carried out by bank staff, consultants or lawyers employed by the bank, although there is an independent reviewer who must be approved by the FCA.

The banks may be represented by lawyers so my client needs legal representation.

Lawyers and accountants both have highly specialised experience to offer, however, given that the review concerns the sale of complex derivative products, we feel that your client is best represented by someone with detailed knowledge of these products and the sales and compliance framework at the time they were sold. This is not about litigation, it’s about compensation.

My client hasn’t received a letter about the review so they’re not eligible.

One of our clients purchased a swap in 2006 but in 2010 broke the swap, paid the break costs and no longer had any connection with that bank. In 2010 he moved premises. He never received any communication from the bank but we pursued them and his claim is now being considered. Just because your client has received no correspondence doesn’t mean they don’t have a claim. Look at any past loans and products, and contact us for advice.

Identifying details of clients have been changed to protect confidentiality.

This article was printed in the November Edition of the CA Magazine.