The FSA must show its muscle over mis-selling The omens are good. Unlike the Royal Bank of Scotland debacle - overseen by Lord Turner - in this case the FSA has been quick to understand the significance of the issue. With its investigation into RBS's collapse, the regulator hid behind legal defences that its hands were tied and that it had done all it could when announcing that the result of its multi-million pound inquiry into what went wrong resulted in a 12-line press release. It was not until politicians from Mr Osborne down pointed out that the approach simply would not do, that Lord Turner and his equally myopic chief executive, the now exiting Hector Sants, reacted. The more comprehensive RBS report finally published last December, is one of the most important documents on the financial crisis produced so far in the UK and could itself lead to further action - as we revealed last week - against some of the directors of the bank. It should never be forgotten that billions of pounds of the public's money was used to bail out the failing institution. On mis-selling, the FSA's response has been more rapid, which is a welcome change. The regulator appeared to make the judgment early on that if hundreds of small and medium-sized businesses are complaining about a problem - and they are - then the issue was worthy of their attention. Lord Turner has privately told colleagues that after the FSA's RBS farrago he argued that the regulator's lawyers needed a different approach. The handling of mis-selling appears to be the fruit of that change. The banks" main line of defence on the issue is that they "followed the rules." Despite The Sunday Telegraph since discovering that at least one bank, Barclays, didn't, it has remained the cornerstone of their somewhat rickety case. But the question is not whether banks followed the rules in the contracts themselves - it is whether the banks offered the products to businesses appropriately. As Guto Bebb, the Conservative MP and one time self-employed businessman who led a very revealing debate on the issue in Parliament last week, said: "My comments state clearly that those products were not necessarily wrong. The question at stake is whether the products were sold appropriately. Sophisticated investors understanding what they are doing should have the right to enter into such agreements. My question is whether banks should be going after businesses with turnovers of less than £200,000 a year? Chip shop owners, bed and breakfast operators and a widow who had little experience of banking may not be the best people to grasp the intricacies of cap-and-collar products, or cap-and-noose products as one MP described them. MPs who spoke in the debate on Thursday revealed evidence that banks had short-circuited controls as they scrambled to sign up customers. In one example, RBS was accused of "seven breaches" of conduct of businesses regulations. What should be done? First the FSA must give a full account of what it has so far discovered, being as transparent as is commercially possible over the evidence it has considered on mis-selling. With the swap agreements often lasting longer than the loan agreements they were supposed to protect, did banks at all times act in the best interests of their clients? Second, the FSA must then take more formal regulatory action against any banks that have been discovered to have breached both the letter and the spirit of the regulations. Although this will take time, it is a necessary and detailed part of holding the banks to account. Third, the FSA should investigate if there is a way for banks to voluntarily come to an agreement with clients where it is clear there is at least a case to answer. As has become obvious, businesses have been left with little chance of redress up until now unless they take tortuous and expensive legal action. The fact that so many people who were sold the swaps found themselves neither represented by the Financial Ombudsman nor the FSA shows there is a gap in the regulatory infrastructure that needs to be plugged. This should be the FSA's fourth concern. What we don't want is a jamboree for "ambulance-chasing" lawyers who wage wars with banks that can stretch on for years. As we have seen with the scandal over the mis-selling of payment protection insurance to retail customers, banks need an exit route by provisioning for badly sold swaps through a non-legal process. As Abraham Lincoln, a self-taught lawyer, said: "Discourage litigation." Lord Turner should agree.