Oct. 06--Victims of controversial interest rate swaps are being discouraged by the Financial Conduct Authority from putting in claims for losses, critics claim.
Swaps were widely sold to firms by banks when they took out loans from 2001 to 2008, on the assurance that these insurance policies would protect them if interest rates rose.
However, when interest rates fell, business owners found themselves paying huge sums for these complex hedging products _ a danger that was not always explained.
Following the FCA's ruling last year that 30,000 firms had been mis-sold swaps, the banks were told to pay compensation for the direct cost of the contract, but also for consequential losses _ losses they suffered as a result of the swap.
Last week the regulator published its monthly update on the progress of the review scheme, which shows that 16 months on just 32 businesses affected have received and accepted redress, worth pounds sterling 2 million in total.
Critics say the small sums paid out so far suggest those firms have received little or nothing in the way of consequential losses. In some cases, firms were unable to win a new deal or develop sales as a result of the crippling repayments.
Alison Berg, managing partner at law firm Berg, believes the FCA is putting pressure on firms mis-sold swaps to 'take the money for the direct swap losses and go away' rather than filing a claim for consequential losses.
Berg points to the FCA statement which says customers will 'typically be offered 8 per cent simple interest on top of their redress payments. We hope this means many customers can avoid having to put together consequential loss claims which are likely to take longer to assess'.
'The FCA appears to be helping banks by effectively telling firms not to file consequential loss claims. This misses the point about just how catastrophic the impact of swaps were for many firms,' said Berg. The FCA said: euro ËœWe would encourage any firm with a genuine consequential loss claim to come forward.'
In total just under pounds sterling 3 billion has been put aside by the banks for compensation. But a report by property consultant DTZ suggests the cost is likely to be closer to pounds sterling 10 billion.
Don and Paul Evans run Springdew, a pharmaceutical packing firm with more than 100 staff in Swansea.
They were sold a swap in 2007 after borrowing a further pounds sterling 300,000 on their business mortgage.
Don said: 'At the time the Monetary Policy Committee was looking at whether to put interest rates up and Barclays told me they probably would and this would protect us.'
But when the base rate began to fall their quarterly repayments rose steeply, reaching pounds sterling 17,000 a quarter.
Barclays agreed there was a mis-sale and that direct costs of pounds sterling 250,000 plus interest were due. However, the brothers, who have yet to file their consequential loss claim, say they were told that when the final offer, to cover direct and consequential losses, is made they would have to accept it first time, or go to litigation, while the suspended swap payments would be reinstated.
Barclays said: 'It is in Barclays' interests as well as our customers to complete the review as soon as possible. We are progressing with it as fast as we can.'