New Financial Conduct Authority (FCA) proposals which would give more SMEs the opportunity to refer disputes related to financial services firms to the Financial Ombudsman Service (FOS) have been backed by experts from a debt services provider.
The FCA recently launched a consultation on the issue of SME access to the Financial Ombudsman Service (FOS) after highlighting that such businesses can often struggle to resolve financial services-related disputes through the courts. As a result, the FCA is now proposing that SMEs which have an annual turnover below £6.5m, an annual balance sheet total smaller than £5m and fewer than 50 employees would be able to apply to the FOS to resolve disputes of up to £150,000. The FOS provides an independent dispute resolution service about financial products and services regulated by the FCA – as well as some unregulated financial products and services – and is free for those making a complaint.
It is hoped that in time the changes will contribute to better services to SME customers, lead to fewer complaints, better outcomes and also contribute wider benefits to the real economy. However, the more immediate and direct impact will be on the ability of SMEs to resolve disputes, with the FCA noting that smaller firms often have more in common with individual consumers than larger businesses and problems can have a huge impact on them.
The FCA estimates that the change will enable more than 150,000 SMEs to complain to the FOS in a way they cannot at present. The FCA is also considering the introduction of rules to allow individuals who have provided personal guarantees or security for certain SMEs’ or micro-enterprises’ liabilities to refer complaints to the Ombudsman. The consultation is set to run until April 22nd 2018.
Reacting to the news, Mark Higgins, Chairman of the debt services provider Ascent, said the move to provide better support to SMEs was a welcome one. He outlined: “We thoroughly endorse what the FCA is trying to do. In our very extensive experience in the financial services sector, we have found that proactivity from this regulator, with support from the FOS, has made an enormous and welcome difference to the way in which consumers experience financial services. We are sure that extension of the regime to the SMEs will have similar effect, though of course it may take some time for the full effects to be seen.”
“While SMEs are often more similar to individuals than larger businesses when it comes to their handling of financial services, they actually have fewer options for redress and rely primarily on courts. ,Only a small proportion take disputes with financial services firms to court. We are hopeful that this consultation will ensure that SMEs can get their voices head and access the redress they need when it comes to financial services matters.”