FCA proposes to give SMEs ability to complain to Ombudsman

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Offline TimeshareTalk

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The UK financial watchdog has proposed to give small businesses the ability to complain to the Financial Ombudsman about their bankers following high profile lending scandals.

The Financial Conduct Authority said in a consultation paper that it wanted to extend access to the ombudsman from individual consumers and micro-enterprises to approximately 160,000 additional SMEs, charities and trusts.

This comes after RBS and Lloyds set up voluntary compensation schemes for SMEs after both banks came under the spotlight for pre-crisis lending practices because of widespread complaints by affected companies.

“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,” FCA chief executive Andrew Bailey said.

“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 Financial Ombudsman is an industry-funded body that can award consumers compensation of up to £150,000 if it finds they were mistreated by financial services businesses.

The FCA said this limit should be raised to £600,000 to cater for higher-value small business disputes, and that the extra investment needed to boost the ombudsman’s remit “would be borne by the industry . . . through higher fees or levies.”

Some small business customers of RBS allege they were pushed to the brink of collapse and restructured for profit by its defunct Global Restructuring Group. An independent review commissioned by the FCA found no widespread evidence of systemic misconduct, although parts of the review were not published and the watchdog is still investigating the bank.

Last February six people were jailed for a total of 47 years over a 2002-2007 fraud in the reading office of HBOS — now part of Lloyds — where struggling small businesses were referred by a handful of HBOS managers to turnround consultancy Quayside Corporate Services and then saddled with unmanageable debts.