Thousands of small Scottish businesses who were sold loans tied to interest rate "swaps" are being excluded from the mis-selling review now under way by the banks and the Financial Services Authority.

According to FSA figures 40,000 businesses UK-wide were sold interest rate swap agreements (IRSAs), which are regulated as derivatives, but The Herald can reveal that many times that number appear to have been sold fixed rate loans which embed swaps but are classified as loans and escape regulation.

An FSA spokesman said yesterday: "The simple position is we regulate standalone interest rate products but we don't regulate loans, even when they have got embedded interest rate products."

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The Herald reported last week that the Clydesdale and Yorkshire banks have now agreed to review all their loans which embed interest rate hedging, with the exception of fixed rate loans. But one business customer with two £900,000 loans, one a "cap and collar" and the other a "fixed rate", faces almost identical breakage fees of around £60,000 on each, and says the loans were sold in the same way.

Now a Glasgow-based group of 14 Clydesdale customers has banded together to challenge the bank over the impact of breakage fees on their businesses, and almost all of them have fixed-rate loans.

When the IRSA scandal first erupted, RBS chairman Sir Philip Hampton told the bank's annual meeting that RBS had largely sold "simple risk management products to control exposure to interest rates".

Lloyds Banking Group said: "This is not a product that we have sold widely or in large volumes, with about 90% of our commercial customers that want to fix their interest rate doing so with a fixed rate loan."

Former Glasgow hotelier Mandy Ford, whose mis-selling complaint has been rejected by the Financial Ombudsman Service (FOS) and now for the second time by Lloyds Banking Group, says Bank of Scotland failed to forewarn her of the £71,000 exit fee on her £420,000 fixed rate loan, which forced the sale of her business last year. The FOS adjudicator ruled the penalty was "not an early repayment fee", but an expense incurred by the bank in "unwinding a fixed interest arrangement that would have been offset in the money market".

Confirming this, the bank's evidence to the FOS included a spreadsheet showing the breakage fees in a column headed Swap.

As in the case of standalone IRSAs, banks made profits from creating and selling on the embedded swaps, with bigger, longer loans yielding higher profits – but triggering the biggest breakage fees. The Bully Banks campaign, with 750 small business members, says swaps were promoted by banks and often made a condition of refinancing, while the hidden timebomb of breakage fees prevents businesses from expanding or rebanking, and threatens thousands of UK jobs.

Abhishek Sachdev of Vedanta Hedging, an expert witness at a Treasury Committee hearing last month, said: "We are working with solicitors and barristers, as well as members of the Government, on making the necessary technical and legal arguments that fixed rate loans should be treated the same as if an SME was sold a standalone derivative. We believe all the UK banks will fight very hard indeed to not have fixed rate loans covered under the FSA scheme, as it would affect thousands of SMEs and add further huge liabilities to the banks." He said some commercial fixed rate loans were genuinely simple, with a fixed early exit charge like a residential mortgage.

Neither Clydesdale Bank nor Lloyds Banking Group were willing to comment on fixed rate loans.