Last updated: 30 Jan 2024 10:30 Posted in:
The UK’s small and medium-sized businesses are set to face a gap in banking dispute resolution when an independent compensation scheme closes, according to Parliament’s Treasury select committee.
MPs questioned whether the Financial Ombudsman Service (FOS) was the appropriate body to handle cases passed to it from the soon-to-close British Business Resolution Service (BBRS), with committee member John Baron MP saying there was “uncertainty around the future of dispute resolution services for SMEs in the UK”.
He added that firms had “deep frustration at the way the dispute resolution landscape is operating”, saying that in his view that the system is biased towards the big banks.
The independent BBRS was designed to resolve disputes involving small businesses and banks. Its closure was originally planned for December 2023 but was pushed back.
Abby Thomas, chief executive and chief ombudsman at the FOS, told the committee’s inquiry into small business lending that the end of the BBRS would leave some businesses ineligible for FOS support.
SMEs are currently able access the FOS if their turnover is less than £6.5m and they have fewer than 50 employees or a balance sheet total of less than £5m. These thresholds cover around 99% of the UK’s 5.6m private sector businesses.
The City watchdog decided in October that it would not expand SME access to the ombudsman, arguing the “level of coverage remains appropriate and that it would not be proportionate”.
Thomas said the FOS still covered the “vast majority” of businesses but cited cases where its “perimeter doesn’t permit us to support the investigation into a complaint, but it would seem quite similar to work we already do on behalf of those small businesses”.
She added: “I think there are other options available to those businesses. So the courts are an option, arbitration is a further option.”
Committee member Dame Angela Eagle said the FOS’ maximum award of £415,000 represented another ‘gap’ for SMEs that lose more than this.
She added that these firms had “the very narrow and obviously not used option of going to the British Business Resolution Service which is soon to be off the scene, or spending lots of money at the High Court, where the backlogs are massive”.
The BBRS has come under fire for resolving just 137 of more than 1,000 cases in its three years of operation.