High Street banks are settling mis-selling claims from small businesses “slower than expected” and need to “speed up the process”, the Financial Conduct Authority said today.
While the banks have set aside £3 billion for compensating businesses that were mis-sold interest rate hedges they did not need or understand, they have paid out just £15.3 million.
Of almost 30,000 cases that the FCA has ordered to be reviewed, only 125 have accepted offers made to them by the banks. Just over 1000 small businesses have been made offers but have not accepted them yet.
The FCA, headed by Martin Wheatley, said there had recently been a pick-up in the process but added: “We have written to the banks to make our expectations clear and agree practical ways to speed up the process. The FCA gave the banks six to 12 months to complete their reviews from the start of the process [in May] and is frustrated that they are all expecting to meet the lower end of the FCA expectations.”
The regulator said the banks had aimed to send out 1000 redress offers in October but had only achieved 800. This was partly because Royal Bank of Scotland had significantly missed its target for “operational reasons”. It is understood this was because the independent reviewer, appointed to each bank, has rejected many of the initial offers RBS proposed to make to small business owners.
Three of the four big banks have now agreed to the FCA’s recent change of mind that they should separate the initial mis-selling claim from consequential loss claims. This means businesses can receive the cost of buying the mis-sold interest rate hedge plus 8% interest more quickly.
Barclays has refused to sign up to this. Chief executive Antony Jenkins reportedly does not believe splitting payments is good for the small businesses or for the bank.
One senior banker said: “Splitting redress and consequential loss will simply string the process out even longer. We could well see claims management companies muscling in on the second part.”
When the FCA launched its review of redress for small businesses mis-sold interest rate hedges, it expected that the banks would complete the whole process within 12 months. This will clearly not now happen.
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As a result, the chief executives of the four big banks have received letters from the regulator telling them to agree practical ways in which the process can be speeded up.
