Small businesses paying huge fees from interest rate swaps to their banks are set to meet the Financial Services Authority this week to call for a quicker and more transparent process.
The Federation of Small Businesses and the small business group Bully Banks will meet the FSA on Wednesday to discuss the issue which could affect up to 40,000 businesses.
Bully Banks, a consortium of SMEs that claim to have been mis-sold interest rate swap agreements, has said thousands of businesses are being pushed towards insolvency because of the delay in implementing the compensation scheme.
The FSA drew up a pilot scheme with banks nearly six months ago to offer redress to companies affected by the scandal. Mike Cherry, national policy chairman at the Federation of Small Businesses (FSB), said: "The FSA has continued to ignore our calls to have this process overseen independently with full transparency. We are six months into the pilot and we have very little detail on what is happening. In the meantime businesses are still having to pay out while they wait."
Some of the swaps – sold with loans as insurance to hedge against rising interest rates – have already pushed businesses into administration. The banks are obliged to review cases of the sales of these hedges to small and medium-sized businesses deemed "unsophisticated" by the FSA, but banks have argued that many of the businesses were fully aware of what they were agreeing to.
Mr Cherrysaid: "Many businesses will have no choice but to take legal action. This is something we have been trying to avoid."
As part of the pilot scheme a letter went out to businesses approved by the FSA, via the banks, at the end of last month explaining the scheme. An FSA spokesman said: "The scheme has been tailored to ensure individual treatment for each business. We believe that this is likely to deliver the best outcome for businesses that bought these products. We are undertaking a rigorous review of the outcome of the pilot to ensure that banks and the independent reviewers are getting it right."Reuse content