Small Talk: Watchdog has left door open on interest-rate swap cases

 

The emails began arriving within minutes of the announcement by the Financial Services Authority that tens of thousands of small businesses have been mis-sold interest-rate swaps by the banks. Within half an hour, no fewer than six "claims management" firms had got in touch offering their views on mis-selling and, naturally, their services to small businesses that might be due compensation.

The words "claims management" are in quotation marks because these companies are little more than ambulance chasers. Having heard that the final bill for the banks may be as high as £10bn, these parasites are already working out how to get a slice of the cake, just as they have so ruthlessly done with payment protection insurance mis-selling.

Miserably, the FSA is giving them a helping hand. Although its literature includes warnings to small businesses that there is no need to use claims management firms, which take (often sizeable) chunks of any compensation paid, it has handed them an open goal.

In the case of PPI, consumers have always had the option of taking their case to the independent Financial Ombudsman Service if they are unhappy with the response received from their bank. But with interest-rate swaps, that won't be an option for the vast majority of small businesses, since only the very smallest firms are covered by the service.

The FSA did consider setting up a one-off scheme within the FOS to consider interest-rate swap cases, but then decided against doing so. It argues that it is already requiring the banks to consult independent reviewers on how they are investigating potential mis-selling cases, and on how compensation payments are calculated, and that it would therefore be inappropriate for the Ombudsman to provide an additional independent service.

One understands the argument, but it means small businesses dissatisfied with the way their case is handled will have nowhere to fight their corner except for the courts. And before they get to that stage, many complainants will be very sceptical that their cases will get a fair hearing, despite the assurances from the regulators.

These are exactly the conditions in which the claims management companies will flourish. They have already begun excitedly whispering about how complicated these cases are likely to be and how much scope there will be for the banks to wriggle out of paying compensation.

Unfortunately, there is some truth in these suggestions. The FSA has done its best to define the criteria businesses will have to meet in order to qualify as the sort of unsophisticated customer that would not have understood the risks inherent in interest-rate swaps. Inevitably, however, there are grey areas where the banks themselves will have to make subjective judgments. There are bound to be businesses told that they are not eligible to complain about mis-selling that do not agree with this assessment.

it is to the FSA's credit it has confronted the scandal (though it had to be persuaded). In failing to extend the Ombudsman service, however, the regulator runs the risk of handing the ambulance chasers another whacking payday they simply do not deserve.

One final thought: why has the FSA not taken a tougher line on requiring the banks to suspend collections of payments on disputed interest-rate swap plans? Now the regulator has warned mis-selling has occurred in as many as 90 per cent of cases, no company should be forced to shell out.

Ubisense to unveil contract boost

Ubisense, the Alternative Investment Market-listed technology company, disappointed last month with a trading update revealing that the timing of some projects had resulted in lower-than-expected revenues.

Now it hopes a new contract will prove the doubters wrong. The Cambridge-based firm, which specialises in smart technology for companies monitoring inventory, will today reveal that a North American client is to renew and extend a managed services contract. The deal is thought to be with Cox Communications, and worth up to $500,000 (£318,000).

Deals famine hits brokers

News that small-cap broker Seymour Pierce is seeking to raise cash underlines how parlous the position of firms in the sector has become amid a fund-raising famine.

Stockbroking firms in this sector have traditionally depended on a steady stream of new issues and M&A work to finance their activities, particularly since the move towards electronic trading has squeezed margins on broking. But figures from Allenby Capital reveal that Alternative Investment Market-listed businesses raised just £3bn last year, the lowest figure since 2003 – and a third down on 2011.

Small Business Man of the Week: Sultan Khan, founder and chief executive, AdMaxim

We decided early on that mobile advertising was going to grow much more quickly than many companies expected, particularly once the iPhone came along in 2007, and we developed an integrated mobile platform offering advertising and marketing options on any device.

"That wasn't what the venture-capital companies we were talking to at the time wanted us to do – they wanted us to be more specialist. But clients were telling us that fragmentation of the industry was holding mobile advertising back, so we decided to listen to them.

"What we've got now is an integrated service that can offer advertising precisely tailored to the user looking at it – for example, by geography, by demography, by type of device and a host of other factors.

"We did secure funding last year, from AdStream, which has made life much easier.

"We're really pleased with our progress – we now work with all of the well-known agencies as well as individual clients such as Tesco and Sony.

"We've delivered campaigns in more than 50 countries and we're working on licensing deals all over the world.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent