Banks are continuing to make slow progress in compensating small businesses mis-sold complex financial products as the City watchdog revealed some firms have been waiting more than six months for the outcome of their case.
The Financial Conduct Authority (FCA) said progress on compensation for so-called interest rate swaps had been slower than expected so far as it revealed only another 22 firms agreed redress deals last month out of nearly 30,000 cases being reviewed. So far 32 offers in total have been accepted totalling £2m.
But the FCA said it expects the number of offers to increase “rapidly” over the next few months, with banks planning to send out more than 1,000 offers in October.
Martin Wheatley, chief executive of the FCA, said: “Whilst we are moving in the right direction, we expect to see the pace at which cases are resolved and redress paid quicken over the coming weeks. Many small business owners have been waiting too long to find out if they were mis-sold and we are now eager to see people repaid as soon as possible.”
The regulator has told banks it wants most customers who have opted into the review to be informed of the outcome of their case and, where applicable, receive initial offers of redress by the end of the year.
Interest rate swaps are complicated derivatives that might have been sold as protection - or to act as a hedge - against a rise in interest rates without the customer fully grasping the downside risks.
They were marketed as low-cost protection against rising interest rates, often as a condition of a business loan.
But businesses as small as bed and breakfasts and takeaway shops were left with major bills after the financial crisis caused interest rates to slide and many faced steep penalties to get out of the deals.
Banks have already put aside £3 billion to cover the cost of compensation, which comes on top of the industry’s mammoth bill for the mis-selling of payment protection insurance (PPI).
Businesses that have been mis-sold swaps will be offered compensation that aims to put them back in the position they would have been in had there not been a mis-sale, plus interest of around 8% a year on top.
Some customers might be able to claim other losses caused by the mis-sale, although the FCA said complicated claims may take longer to process.