Although Britain’s banks are speeding up payments to compensate small businesses over the hedging products mis-selling scandal, just £206 million has been paid out of the £3.75 billion fund set aside to compensate small firms targeted by banks.
The small fraction of total repayments was revealed by new data from the Financial Conduct Authority. The payouts to small businesses come in addition to £20 billion in funds set aside by leading UK banks to repay consumers misled by the deceptive mis-selling of loan insurance.
Britain’s four largest banks – The Royal Bank of Scotland, Barclays, HSBC and Lloyds Banking Group – have paid out just £306 million to small firms. By the end of 2013, a total of just £159 million had been paid out to small companies, many of which had accepted alternative products as a form of compensation.
The businesses were mis-sold products designed to protect against rising interest rates. As rates fell and many of the businesses targeted by banks were forced to pay large bills, many business owners voiced their concern and frustration at the type of tactics being used by banks to sell their products.
Many companies only managed to cancel their hedging arrangements after paying significant fees to the banks, often in the tens of thousands of pounds. All four of the banks involved in the scandal were instructed to pay compensation last May by the Financial Conduct Authority after the issues in the products were revealed.
Small businesses were not the only victims of bank mis-selling in 2012 and 2013. A large-scale mis-selling scandal involving payment protection insurance resulted in many UK consumers being sold insurance products using misleading claims. Banks involved in the PPI mis-selling scandal have also been instructed to compensate consumers affected by the misleading sales tactics and deceptive products.
