FCA blasted as weak, toothless and anaemic? for failing small businesses over mis-selling of financial products
Gary Streeter, the Conservative MP for South West Devon, has lambasted the Financial Conduct Authority (FCA) for failing to take a strong enough stance on the mis-selling of financial products to small firms.
In a debate in parliament on the Bank of England and Financial Services bill on 1 February, Streeter blasted the regulator as weak, toothless and anaemic? for not offering enough support to SMEs inappropriately sold Interest rate swap agreement (IRSA) products.
The financial instruments which protect buyers against increased costs when interest rates rise, but cause them to suffer financially when they are lowered were marketed aggressively to small businesses by banks including Barclays and RBS from 2001 to 2008, with many lenders making the purchase of IRSAs a condition of providing finance.
Streeter highlighted the plight of an SME family business in his constituency that was forced into administration because of being sold such a product, and criticised the FCA for excluding some small firms deemed ‘sophisticated? from a compensation scheme for victims.
He explained: The family behind that constituency company were brilliant at buying old commercial premises and converting them into small units to let on flexible terms to small businesses the very thing we want to encourage in our economy but they had no understanding of complex financial instruments.
when they first asked me to help some years ago, it took me, with my brilliant first-class degree in law I knew I should say that, as nobody else would and 15 years? experience as a corporate lawyer, days to get my head around the swap they had been sold, which was completely inappropriate for their business. How on earth were they supposed to understand it?
but because they were, ludicrously, deemed ‘sophisticated borrowers, they were excluded from the FCA scheme and are having to resort to litigation to get justice. I believe they will win and win heavily, but it should not be necessary and it sickens me that RBS is defending this litigation with taxpayers? moneythat just does not seem right at all.
Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics as well as running a tutoring company.
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