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FCA and FOS clarify CBILS-BBLS SME rules

6 May 2020: the Financial Conduct Authority (FCA) and Financial Ombudsman Service (FOS) have provided additional clarity for banks and SMEs regarding the two government loan schemes available during the coronavirus crisis.

The FCA has confirmed its view that “the vast majority” of businesses borrowing under the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) will be eligible to complain to the FOS about acts or omissions by firms in relation to loan agreements under the schemes. 

This is good news for SMEs following the extension of the FOS’s jurisdiction in 2018. To access the Ombudsman Service, SMEs have to meet the turnover test (£6.5m) and also one of either the headcount (50 employees) or balance sheet total (£5m) tests, rather than all three.

It does, however, leave banks wanting greater certainty over the terms on which they’re lending, particularly with regards to the BBLS where no creditworthiness or affordability check takes place, and loans made under CBILS since 27 April 2020, when the evidence requirements were relaxed. 

The FCA set out some aspects of the remit of the Ombudsman in complaints, and how it expects the Ombudsman to approach complaints:

  • How lenders have entered into and administered loans
  • Has the lender properly provided information to borrowers as specified by the scheme 
  • Taking account of the fact that the schemes require borrowers to self-certify that, among other things, they have been adversely affected by the pandemic and are borrowing to address that.

The Chief Ombudsman Caroline Wayman confirmed: “We recognise that the schemes require lenders to take a different approach to lending and that this approach will be determined by the schemes’ requirements and the new regulatory arrangements.”

Commenting on the correspondence Philippa Kelly, Director of ICAEW Technical Strategy Business Group said: “It is important that banks and businesses have as much clarity as possible around the terms of CBILS and BBLS. Making decisions in times of stress and pressure, particularly when law and regulation is being rapidly adapted to obtain the best outcome for all parties, is difficult for everyone. Certainty around rights and expectations will help enable both banks and SMEs to feel more confident."