MPs are calling for the FCA to be given the power to launch a redress programme for those who were missold embedded interest rate swaps.
However, the redress scheme only covers swaps sold as an independent product, and not swaps which were embedded in business loans. The review also excludes some SMEs based on whether they are large enough to understand the risks.
The FCA says the review excludes embedded swaps because they are classified as commercial loans and are therefore not regulated.
A spokesman for the FCA says swaps sold independently are classed as a “separate derivative” whereas embedded swaps are an “integral part of the loan”.
But Treasury select committee member John Thurso, a Liberal Democrat MP, says there is no reason why a similar redress programme should not be set up for those who were missold embedded swaps.
He has tabled an early day motion calling for a review and access to redress for those affected by embedded swap misselling, and for the products to be regulated.
The motion has so far been signed by 18 MPs, including TSC members Stewart Hosie and Andrew Love.
Speaking to Money Marketing, Thurso says: “The exclusion of embedded swaps from the redress scheme is something I have spoken to FCA chief executive Martin Wheatley about and there is no dispute between myself and the FCA.
“The FCA has very helpfully pointed out to me that it is not, in its view, legally empowered to undertake a review on these products.
“This is a cry for help from the FCA. It is over to us in parliament to make sure we either give the FCA the power to do it or instruct someone else to do it who can act in a similar vein.”
He adds: “We want to make sure that going forward unscrupulous banks do not embed everything in order to escape regulation, which is a clear danger.
“Where there has been misselling, it should not be up to the individual to start a lengthy legal challenge against a bank. We should be looking at redress and that is exactly what we are doing with vanilla swaps and I see no reason why there should not be a similar mechanism for embedded swaps.
“We are talking about people who were told they were taking out a loan from their bank and actually they were buying a complex financial product.”
Nab Customer Support Group, a consumer action group campaigning on behalf of SME owners who were missold swaps, estimate that embedded swaps – packaged as tailored business loans – were sold to 4,000 small businesses in the UK.
The group says the early day motion marks a “significant step forward” in its battle to achieve redress for those affected.