SMALL businesses that were mis-sold complex financial products have been urged to sign up to a compensation scheme as quickly as possible after new figures showed a jump in the amount of redress paid out last month.
The City regulator said payments to firms that bought interest rate swap products almost doubled in December, though the payouts represent a tiny fraction of the £3 billion in compensation that banks have set aside.
According to the Financial Conduct Authority (FCA), swap redress payments reached £158.6 million last month, up from £81.2m in November. Director of supervision Clive Adamson said banks have “picked up the pace” since the watchdog wrote to the bosses of the UK’s four largest banks to speed up the compensation process.
Adamson said: “May remains the target for all offers to have been sent out and the banks involved are working towards that. Any affected business that has been invited to join the scheme and hasn’t needs to act now so they can receive the redress they’re due.”
A total of 1,040 offers of compensation had been accepted by the end of last month, with an average payout of £152,500 – more than triple the £50,000 average seen in August.
The figures also show that 96 per cent of swaps had been mis-sold. The products were marketed as protection against rising borrowing costs, but the financial crisis caused rates to slide and many firms faced stiff penalties to get out of the deals.
Royal Bank of Scotland, which has by far the largest amount of outstanding claims, has now made 1,505 offers of compensation, and 23 per cent of its customers have been told the outcome of their case.
An RBS spokesman said: “We are committed to ensuring that all those that were mis-sold these products get fair and reasonable redress. We are working hard to process cases as quickly as possible prioritising those businesses that are most in distress first.”
Lloyds Banking Group said more than half of its customers have received a redress statement, “fulfilling the FCA’s request that all banks meet this target before the end of 2013”.
A spokesman added: “The group remains on schedule to communicate redress outcomes to all customers within the 12-month timeline set by the FCA and is committed to settling the redress with customers as quickly as possible.”
However, John Allan, national chairman of the Federation of Small Businesses, said lenders “must not get complacent” and need to make swift progress in paying out the remaining redress in order to rebuild trust.
He said: “It is good that the banks are finally making headway in offering redress for mis-sold rates swap agreements with over £158m paid out, but there are still an estimated 40,000 businesses awaiting redress.”
By the end of December, 18,700 customers had been invited by banks to have their cases reviewed, but 3,700 have yet to take action. Banks will start sending out final reminders over the next few months to encourage as many customers as possible to opt into the scheme, as they face being locked out unless they respond to their original invitation letter within three months.
Anthony Browne, chief executive of the British Bankers’ Association, said: “Anyone who wrongly suffered as a result of having been mis-sold an interest rate hedging product will get appropriate and fair redress.”