30th Jan 2013
Shadow business secretary Chuka Umunna has urged the Financial Services Authority (FSA) to provide a "fair solution" for small firms who have been mis-sold bank products.
Ahead of the results of a pilot scheme to offer compensation on mis-sold interest rate swap agreements (IRSA), due to be announced by the FSA tomorrow, Umunna has called on the FSA to ensure the scheme "commands the confidence of the business community" and puts "SMEs into the position they would have been in had they not bought the mis-sold product concerned".
Writing in the Huffington Post, Umunna also asked the FSA to provide clarity on the fact that the scheme is limited to "non-sophisticated" business customers.
"A sophisticated customer is described as one with either having a turnover of more than £6.5million, a balance sheet of more than £3.26million or more than 50 employees. This is too restrictive a definition and must be broadened," he said.
In addition, he warned of the risk that more businesses could be pushed under due to ongoing charges related to mis-sold products, as the process continues.
Umunna also questioned what the FSA means by a bank providing "fair and reasonable redress" to affected customers.
"This needs clarification so the system for redress is open, transparent and applied in a consistent manner," he remarked.
Meanwhile, IRSA campaigning group Bully Banks has written to the FSA this week, also seeking clarity on many of the same issues, as well as urging the regulator to resist pressure from banks to "water down" its findings, as reported in The Telegraph.
The group has called on the FSA to "clearly stipulate" how it will decide if mis-selling has occurred and has asked it to reconsider the fact that the scheme is only open to "unsophisticated borrowers".
Jeremy Roe, chairman of Bully Banks, said: "We are concerned that there are those in government and in the banks who seek to reduce the scope of the FSA’s scheme because of the fear that the scale of redress will damage the balance sheets and share price of the banks.
"We believe that the FSA is fully aware that the banks mis-sold these products. We are concerned that they [will not be] allowed to act with the rigour that is required of an effective regulator. If this is the case this is a major political scandal in the making."