FSA branded ‘toothless’ over banking probe

Bully-Banks, a pressure group which represents businesses who have been affected by bank mis-selling, claims that not a single company has had its case resolved under a rescue plan announced by the Financial Services Authority (FSA) in June.

Earlier this year, the FSA revealed it had found “serious failings” in the sale of interest rate hedging products to some small and medium-sized businesses (SMEs).

The FSA, headed by Adair Turner, said it had uncovered a range of poor sales practices in connection with these products.

The FSA ruled that, in some cases, there was poor disclosure of exit costs and a failure to ascertain the customers’ understanding of risk.

There were also cases of “over-hedging” – the amounts and duration did not match the underlying loans.

The FSA also ruled that “rewards and incentives” were the drivers of these practices.

Yesterday, the FSA said it was working hard to ensure a process was in place to get the right outcome for victims of mis-selling.

Bully-Banks claims there is “a desperate need” for the FSA to establish clear, easy-to-understand principles to define mis-selling and encourage swift resolution.

“You don’t need a 100-page guide to establish there is a smoking gun,” said Jeremy Roe of Bully-Banks.

“There has been a significant increase in numbers of cases now being reported by the banks.

“We have been saying all along the numbers could be as much as 100,000.

“The FSA has so far failed us in securing justice. We need decisive and principled action to stop the banks getting away with it.

“The longer this resolution process drags on, the more companies will go into administration or go bust, or small business people will increasingly accept unjust and significantly lower ‘offers they can’t refuse’ because they are desperate to survive... we will witness hundreds of good companies going out of business.”

A Yorkshire businessman, who attended the Bully Banks national conference in Birmingham, said that more pressure should be placed on big institutions to get the best outcome for small businesses.

Around 400 people attended Sunday’s conference.

The businessman said: “During the question and answer session, there were some real horror stories – including people who have lost their homes, businesses, and in some cases it has even cost them their marriages.

“It also came to light that the FSA has recently announced the number of people affected by this problem is up from 28,000 to 40,000.

“That is a huge increase, and I believe that the true figure could be even greater.

“What we all want is a swift and fair conclusion to this situation, so we can all get on with the important job of running our businesses. It’s reassuring that we have more of a voice.

“The Bully Banks group has done a superb job.”

The Bully-Banks pressure group has devised a four-point plan which, it claims, will speed up the process of getting justice for victims of mis-selling.

Mr Roe added: “The regulators have so far acted like toothless snails.

“Thousands of ordinary people in business have already been let down by the banks.

“They are now being let down by the financial regulators who were supposed to have been regulating the banks’ conduct.”

A spokesman for the FSA told the Yorkshire Post that a “huge amount” of progress was being made to ensure that victims of mis-selling obtained justice.

The spokesman added: “There is no point agreeing to a process (with the banks) that doesn’t deliver.

“The FSA is working hard to ensure that the right process is in place to deliver the right outcome for people who have bought these products.”

A British Bankers’ Association spokesman said: “Our members have been working closely with the FSA while it carries out its thematic review into interest rate swaps and will continue to co-operate fully.”

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