A Financial Services Authority (FSA) project to compensate thousands affected by the interest rate swaps mis-selling saga has been criticised for not having the victims' interests at heart.
The Federation of Small Businesses (FSB) has written to the Treasury to express its "urgent concerns" that the FSA's process has had the banks "at its core" and that costly litigation may end up being the "only route" available to victims, reports the Telegraph.
More than 40,000 interest rate derivatives are estimated to have been sold to smaller and medium sized businesses by banks in the past decade, according to the FSA.
The complex derivatives products - which were sold alongside conventional bank loans - were supposed to protect against a rise in interest rates, but left customers with huge losses when rates fell. Many complainants said they were not warned of the risks of the products.
The FSA is expected to reveal the results of a pilot scheme to provide redress to those affected this week.
But, in a letter to Greg Clark, financial secretary to the Treasury, the FSB said there is "no clear indication that the announcement will provide a straightforward, unambiguous way forward".
"We remain deeply concerned that the banks themselves have been at the core of this process," the FSB added.
It also urged the government to take "whatever steps [it] can" to ensure the scheme is "one in which small firms so very badly affected by mis-selling can have full confidence".
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