A pressure group which claims that tens of thousands of jobs could be lost as a result of a mis-selling scandal involving the major banks has marched on Westminster to demand justice.
Representatives of Bully Banks, an organisation that speaks up for victims of Interest Rate Swap (IRSA) mis-selling, held a “Brolly Brigade” protest outside Parliament.
Bully Banks has been infuriated by what it describes as the “viciously slow resolution process” for victims of mis-selling.
The banking industry is facing a big compensation bill after a review of IRSAs sold to small businesses found that more than 90 per cent had been mis-sold. In 2012, the Financial Services Authority (FSA) – which was replaced by the Financial Conduct Authority (FCA) this year – said a “significant proportion” of the cases that were the subject of the review were likely to result in redress being due to the customer.
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. In many cases, the customer did not fully grasp the risks involved. They were marketed as low-cost protection against rising interest rates, often as a condition of a business loan. But businesses such as bed and breakfasts and takeaway shops were left with colossal bills after the financial crisis caused interest rates to plummet to historic lows. In some cases, this cost has dragged the firms under.
Bully Banks claims that victims’ problems are not over, despite the fact that the Financial Conduct Authority (FCA) has put a redress system in place.
Bully-Banks chairman Jeremy Roe is demanding that the board members of every bank reconsider the definition of “sophisticated investor”.
He claims the banks cannot exclude 39 per cent of SMEs (small and medium-sized enterprises) sold IRSAs from the FCA scheme on the grounds that they are classified as sophisticated, and therefore capable of understanding the risks.
He is also calling on the banks to agree to provide “reasonable future banking facilities” for SMEs as part of redress.
A Bully Banks spokesman said: “Without those future banking facilities, redress will be a sham.”
Bully Banks is calling on every bank to agree to meet the “reasonable professional costs of SMEs” seeking to demonstrate the consequential losses they suffered.
Mr Roe said: “It is now 16 months since the FCA review and redress scheme was announced. It is a scandal in its own right that it is taking so long to implement this scheme and get equitable redress to all SMEs mis-sold IRSAs.”
Martin Wheatley, the chief executive of the FCA, speaking at the Mansion House, in London, said this week: “In too many cases, the first injustice is compounded by a second of failing to deal with the problem adequately. So, in key cases like interest rate swap mis-selling, the initial ‘unfairness’ – the sale of a complex hedging product to consumers who did not need the product; did not understand the downside risks; cannot extricate themselves from the agreement; and cannot refinance – is too often aggravated by the response of the banks that sold the product in the first place.
“In a situation where many small employers who took out these products may be struggling to make ends meet, the industry deceives itself if it imagines that a total of 32 offers accepted, totalling £2m, is adequate progress. It isn’t. We need to move faster to get redress where it is justified.”
Mr Wheatley said “a very positive step” had been the commitment that some banks have made in the last few days to fast track the payments; in particular to get an initial redress payment out as a first step while the debate on consequential loss continues.
He added: “I hope that other banks will also look at what can be done to expedite the process.”
According to figures released by the FCA, by early September only 10 small businesses had accepted an offer of redress in connection with IRSA mis-selling.
British Bankers’ Association spokesman declined to comment on Bully Banks’ proposals yesterday.