The redress system was set up by the FSA in conjunction with banks, but Guto Bebb MP believes the regulator may be delaying the scheme as some banks are not yet prepared to take part.
"If some banks are ready to commence work on such pilots would it not be desirable for them to be allowed to test their processes?" Bebb asked in a letter to the FSA and seen by City A.M. "This would send a clear and very welcome message to SMEs all over the UK, many of whom are increasingly doubtful as to whether their losses will even be considered before Christmas, that the process is moving forward as initially envisaged."
And Bebb asks the FSA to "reconsider their approach" if they are simply planning on coordinating action across the industry.
"We should not allow a position to develop where the banks can only move forward at a pace dictated by the most intransigent and ineffective institutions," he concluded.
The FSA said it would consider the letter and formally respond in due course, but could not comment at this stage.