Watchdog to enhance protections for small businesses

This follows a review of the protections available to SMEs as users of financial services. Currently, 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, but the FCA believes that many small businesses would struggle to do this in practice.

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

The regulator said this would be done by changing the eligibility criteria to access the Ombudsman, so businesses with fewer than 50 employees, annual turnover below £6.5m and an annual balance sheet below £5m would become eligible.

The FCA said 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.

Andrew Bailey, chief Executive of the FCA, 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.”

The watchdog said that further 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. 

The FCA is asking for responses to the consultation by April 22 this year and intends to publish a policy statement making final rules this summer.