The trust of small businesses in banks has been severely affected because of inappropriate mis-selling, according to the chairman of the Federation of Small Businesses.

John Walker, made the comments yesterday as he and regional FSB chairman Robin Twigge met with Paul Adcock, managing director of Watton-based electrical retailer Adcocks, to hear first hand about the latter's problems with his bank and a complex interest rate derivative scheme.

Today, more than 40 MPs, including George Freeman, who represents Mid Norfolk, will discuss at the House of Commons the growing issue over the alleged mis-selling of the so-called interest rate derivative schemes.

These products are promoted by all major banks – including Barclays, HSBC, RBS and Lloyds TSB – to protect business borrowers from spikes in interest rates by capping payments. Mr Adcock claims he was a victim of this form of mis-selling after taking out a derivative scheme with Barclays in 2007 after being approached by the bank. The loan will need to be paid back over the next five years.

The business, which was founded by his great-grandfather Earnest in 1912, has been a Barclays customer since its formation.

A year before, Mr Adcock had borrowed �970,000 as part of a 25-year deal which would remortgage the business and pay for the store's refurbishment.

He said: 'We are locked in at the moment. It is like being in handcuffs with the worst mother-in-law – you cannot get away.

'This is the same story echoed by thousands and thousands of businesses across the country.'

Mr Adcock is paying �7,700 per month to Barclays and the net cost of signing up to the scheme has so far been �175,000.

The financial strain has caused the business's cashflow to become tight, preventing Mr Adcock from buying more stock and resulting in the loss of three staff over the past year.

When Mr Adcock was offered the derivative scheme by Barclays, he said that he did not understand it, had not asked for it and didn't want it.

'But because of the relationship with the bank, I trusted them,' he added.

Mr Walker said: 'It was like a trusted friend had let them down.

'The FSB feels the cap and collar interest rate arrangements are wholly inappropriate for the average business, but more appropriate for multinationals who have thousands of millions of pounds.'

sophie.wyllie@archant.co.uk