Small businesses will be allowed to complain to the Financial Ombudsman Service if they have a dispute with a financial services firm, under plans announced by the Financial Conduct Authority (FCA).

This would mean that small and medium sized enterprises (SMEs) could pursue redress of up £150,000 without having to resort to the courts.

Following a review of the protections available to SMEs as users of financial services the FCA has launched a consultation on plans to give more small businesses access to the Ombudsman.

At the moment only individual consumers and around 5.5 million micro-enterprises (the smallest type of business) can access the Ombudsman if they have a dispute with a financial services firm.

Businesses that cannot access the Ombudsman would need to take the firm to court. However, the FCA believes that many smaller businesses within this group struggle to do so in practice.

Under the changes proposed by the FCA, approximately 160,000 additional SMEs, charities and trusts would be able to refer complaints to the Ombudsman.

This would be done by changing the eligibility criteria to access the Ombudsman, so businesses with fewer than 50 employees, annual turnover below £6.5 million and an annual balance sheet (i.e. gross assets) below £5 million would become eligible

Currently businesses with 10 or more employees and annual turnover or annual balance sheet (i.e. gross assets) above €2m, cannot refer complaints to the Ombudsman. Charities with income over £1m and trusts with net assets above £1m are also ineligible.

As long as a complainant is eligible, the Ombudsman can consider complaints about any regulated activity. It can also consider complaints about some unregulated activities, such as, lending to companies or the activities of business turnaround units.

The FCA also proposes to extend eligibility to personal guarantors of corporate loans, provided the borrowing business also meets the eligibility criteria.

“It is important for everyone, including financial services firms, that there is an effective dispute resolution mechanism for businesses,” said Andrew Bailey, Chief Executive at the FCA. “Our evidence suggests some small businesses currently find it hard to achieve a fair outcome in disputes with financial services firms because court action is not a realistic option for them.

“We have considered what could be done within our powers and the remit of the Financial Ombudsman Service to improve this situation and are proposing to expand access to the Ombudsman.”

The FCA is asking for responses to the consultation by 22 April 2018 and intends to publish a Policy Statement making final rules in summer 2018.

If you would like to make a comment on the consultation, please follow this link

Small businesses will be allowed to complain to the Financial Ombudsman Service if they have a dispute with a financial services firm, under plans announced by the Financial Conduct Authority (FCA).

This would mean that small and medium sized enterprises (SMEs) could pursue redress of up £150,000 without having to resort to the courts.

Following a review of the protections available to SMEs as users of financial services the FCA has launched a consultation on plans to give more small businesses access to the Ombudsman.

At the moment only individual consumers and around 5.5 million micro-enterprises (the smallest type of business) can access the Ombudsman if they have a dispute with a financial services firm.

Businesses that cannot access the Ombudsman would need to take the firm to court. However, the FCA believes that many smaller businesses within this group struggle to do so in practice.

Under the changes proposed by the FCA, approximately 160,000 additional SMEs, charities and trusts would be able to refer complaints to the Ombudsman.

This would be done by changing the eligibility criteria to access the Ombudsman, so businesses with fewer than 50 employees, annual turnover below £6.5 million and an annual balance sheet (i.e. gross assets) below £5 million would become eligible

Currently businesses with 10 or more employees and annual turnover or annual balance sheet (i.e. gross assets) above €2m, cannot refer complaints to the Ombudsman. Charities with income over £1m and trusts with net assets above £1m are also ineligible.

As long as a complainant is eligible, the Ombudsman can consider complaints about any regulated activity. It can also consider complaints about some unregulated activities, such as, lending to companies or the activities of business turnaround units.

The FCA also proposes to extend eligibility to personal guarantors of corporate loans, provided the borrowing business also meets the eligibility criteria.

“It is important for everyone, including financial services firms, that there is an effective dispute resolution mechanism for businesses,” said Andrew Bailey, Chief Executive at the FCA. “Our evidence suggests some small businesses currently find it hard to achieve a fair outcome in disputes with financial services firms because court action is not a realistic option for them.

“We have considered what could be done within our powers and the remit of the Financial Ombudsman Service to improve this situation and are proposing to expand access to the Ombudsman.”

The FCA is asking for responses to the consultation by 22 April 2018 and intends to publish a Policy Statement making final rules in summer 2018.

If you would like to make a comment on the consultation, please follow this link