The Financial Services Authority has ordered four banks to review their sales of interest rate hedging products to small businesses.
Barclays, HSBC, Lloyds and Royal Bank of Scotland will have to review individual sales and provide redress to customers where neccessary. Redress will put the businesses back into the position they should have been without the mis-sale.
It follows the FSA's identification last June of serious failings in the sale of these products. The FSA looked at 173 sales to non-sophisticated customers and found over 90 per cent did not comply with at least one regulatory requirement. A 'significant proportion' of these will result in redress but the FSA said some more complex cases would not be representative of all sales.
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Martin Wheatley, chief executive designate of the Financial Conduct Authority, said: "This marks significant progress in our review of these products. We believe that our work will ensure a fair and reasonable outcome for small and unsophisticated businesses.
"It is important to remember that this review is firmly focused on the particular circumstances of each sale. These will determine whether there were failings in the sales process and, if so, whether redress is due."
Matthew Fell, Confederation of British Industry director for competitive markets, said: "The mis-selling of interest rate products was unacceptable. Any small business that has been mis-sold insurance products should be swiftly and fully restored to the position they would have been without the mis-sale.
"In resolving the situation, regulators should learn from PPI which has been a protracted affairs for both banks and consumers, serving neither party well. Giving businesses prompt and proper redress will enable banks to then focus on lending to the real economy."
The FSA has also been reviewing sales of the products by Allied Irish Bank, Bank of Ireland, Clydesdale and Yorkshire bank, Co-operative Bank and Santander UK. The FSA said it expected to confirm a full review by 14 February.
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