UK lawmakers attack regulator over swaps redress scheme
By Matt Scuffham
LONDON (Reuters) - A scheme set up by Britain's financial regulator for banks to compensate small firms mis-sold complex interest rate hedging products lacks transparency, is inconsistent and does not give victims a proper right of appeal, lawmakers said on Thursday.
British lawmakers were debating why thousands of customers had their claims for compensation rejected or were offered alternative products in the scheme, which was set up by the Financial Conduct Authority last year.
The FCA ordered banks to review nearly 30,000 cases for possible mis-selling after finding serious failings in the way the products were sold. But the scheme has drawn sharp criticism from firms that believe it is loaded in favour of the banks.
"There is no confidence in this process. The whole point of the FCA is to protect unsophisticated consumers. They've manifestly let these consumers down," Conservative Mark Garnier told a parliamentary debate on Thursday.
Garnier, a member of parliament's Treasury Select Committee, called on Britain's finance ministry to set up an independent review of the scheme.
Labour's finance spokesman Cathy Jamieson questioned why more than a third of the cases were kicked out before the scheme even began on the grounds that those clients were financially "sophisticated" enough to understand the agreements.
Jamieson said she agreed that there should be a cut off point where firms are deemed big enough to take responsibility for buying the products but said "how the distinction is arrived at is a different question entirely".
Guto Bebb, chairman of the All Party Parliamentary Group on Interest Rate Swap Mis-selling, said there was a lack of consistency in the way claims were treated by different banks and called on the FCA to implement a proper appeals process.
He also questioned whether the role of the scheme's independent assessors - usually big accountancy firms - had been properly examined. Those assessors are supposed to ensure all customers are treated fairly.
The hedging products, known as swaps, were meant to protect smaller companies against rising interest rates, but, when rates fell, the companies had to pay extra charges, typically running to tens of thousands of pounds. Companies also faced penalties to extricate themselves from the deals, which most claimed they had not been made aware of.
The FCA has said the scheme is fair.
(Reporting by Matt Scuffham; Editing by Elaine Hardcastle)
