The UK financial watchdog launched a 12 week consultation on widening access to the Financial Ombudsman for small and medium sized enterprises (SMEs) to resolve disputes quickly, informally, and at a low cost. Currently only micro-enterprises and consumers are able to complain about financial services firms in this way.
In response to a 2015 discussion paper which found that taking financial services firms to court is not a viable option for many SMEs and that there are few alternatives to seek redress, the FCA are proposing to change the eligibility criteria to access the Ombudsman to include SMEs, meaning there will be "an effective dispute resolution mechanism" for all businesses.
Under the new proposals, approximately 160,000 additional businesses will be able to refer complaints to the Ombudsman instead of having to take financial services firms to court in the event of a dispute.
The Ombudsman is an independent dispute resolution service that considers complaints for regulated activities and some unregulated activities, such as lending to smaller businesses. SMEs are business with fewer than 50 employees, an annual turnover of £6.5m and an annual balance sheet below £5m, and so are more like consumers than larger businesses in terms of bargaining power against big banks, according to the FCA. Access may also extend to include personal guarantors of corporate loans, if the borrowing business meets these criteria.
SMEs will be able to lodge complaints about banks and claim compensation of up to £600,000 (currently £150,000) if mistreated by financial services businesses. This additional fund will be raised through increased fees and levies on the market.
The consultation opened on 22 January 2018 and closes on 22 April 2018.
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