Compensation for small businesses who were mis-sold insurance is “painfully slow”
Mon Oct 07, 2013 10:35 AM
Compensation for small businesses who were mis-sold ‘rate swap’ insurance products has begun. However, the Federation of Small Businesses (FSM) has said that the process has been “painfully slow”The compensation relates to small businesses, such as bed and breakfasts and restaurants), who were sold convoluted insurance products they didn’t need by banks.
Buying the insurance (known as ‘rate swap’ as it was said to protect businesses against rising interest rates) was often made a condition of receiving a loan. But banks failed to make many businesses aware of the risks, and when interest rates were slashed, it left them facing large bills or costly exit penalties.
Following a review by the Financial Conduct Authority (FCA) in 2012, Barclays, HSBC and RBS agreed to pay compensation to mis-selling dating back to 2001. Yet so far only 10 of over 30,000 cases have been compensated.
“We are quickly losing confidence in the banks and the regulator as this scheme remains unbelievably slow,” said John Allan, national chairman of the FSB. “We warned that if the process isn’t quick and fair it would risk litigious claims, and further undermine confidence between small firms and the banks.”
It is estimated that the banks could pay out over £3bn in total. However, FCA chief executive Martin Wheatley said that with 85% of cases under review, they were “making progress”.
“But like the thousands of affected small businesses, we want to see redress paid quickly to those who have suffered loss as the result of mis-selling,” he added.