Small firms could be allowed to complain to Financial Ombudsman under proposed rule change
Britain's financial watchdog is considering allowing small businesses to complain to the Financial Ombudsman following well-publicised scandals involving some of the major banks.
Currently, only individual consumers and around 5.5 million “micro-enterprises” can access the Ombudsman if they have a dispute with a financial services firm. Businesses that cannot access the Ombudsman need to take the firm to court, which many find impossible because of the high costs.
But the Financial Conduct Authority (FCA) said that following a review, it is launching a consultation proposing that 160,000 additional SMEs, charities and trusts be able to refer complaints to the Ombudsman.
This would be done by changing the eligibility criteria so businesses with fewer than 50 employees, annual turnover below £6.5 million and gross assets below £5 million would become eligible.
FCA chief executive Andrew Bailey said: “It is important for everyone, including financial services firms, that there is an effective dispute resolution mechanism for businesses. 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 statement added: “The FCA proposals focus on the Financial Ombudsman Service because of its expertise in the financial services sector and the FCA’s statutory role in relation to it. More material changes, such as changing the basis for the way the Ombudsman makes decisions to enable it to deal with significantly higher value disputes, would require legislation, which only the Government can introduce.”
However, Kevin Hollinrake MP, the vice chairman of the All Party Parliamentary Group for Fair Business Banking, said on Twitter: “Widening the scope of the Financial Ombudsman Service would not bring the required transparency to the system and will still leave many companies unable to access justice.”
Mr Hollinrake, who is the Conservative MP for Thirsk and Malton, is calling for the creation of an independent tribunal to oversee complaints about the banks from SMEs (small-and-medium-sized enterprises).