Financial Ombudsman Service: 99% of SMEs can bring their complaints to us
11 January 2021: The Financial Ombudsman Service is the alternative dispute resolution service for those with a complaint about financial products and services. Its recently expanded remit allows more SMEs to access their services.
“The Financial Ombudsman Service exists to resolve disputes that arise between the users of financial products and services and the providers of those products and services,” says Andrew Wright, Ombudsman Leader at the Financial Ombudsman Service. “The vast majority of the disputes we resolve relate to consumers. But a recently expanded remit means more small businesses now have access to our service too.”
“For many years, the Financial Ombudsman Service had jurisdiction to consider complaints from microenterprises as well as consumers, recognising that microenterprises have many of the same features as consumers when it comes to their ability to get problems addressed,” says Wright. “But from 1 April 2019, our jurisdiction was expanded so we can now consider complaints from small businesses too – the next tranche of businesses above microenterprises – with up to £6.5m in turnover.”
The shift recognises it is not just microenterprises that do not have the resources to pursue complaints through the courts – many small businesses don’t either. Wright joined the service last year to lead the team which handles these small business complaints. The volume of complaints has been growing over time and COVID has brought a whole new dimension, with many complaints arising in relation to the government-backed loan schemes and business interruption insurance.
“Given the recent changes to our jurisdiction, we’re aware many small businesses don’t know that they can bring their complaints to us,” says Wright. “People think of us as being a consumer-oriented body, and the vast majority of complaints that we consider are from consumers, but we very much exist for small businesses too.”
He continues: “If a small business is having a problem with its bank, its insurer or another financial provider, one of the places it’s likely to go for advice is to its accountant. We’re keen that accountants know that small businesses can bring their complaints to us. With the thresholds we now have, over 99% of businesses across the UK can use us, and we’re paid for entirely by the financial services industry so it won’t cost the small business a thing.”
The framework for dealing with complaints is the same, regardless of the nature of the complaint. The ombudsman will take into account all the circumstances of the complaint, and the relevant legislation, regulation, rules and standards, to decide the fair and reasonable outcome. However, the service often establishes project teams where particular products generate a high volume of complaints. “For example, we have a project team in place to deal with the government-backed loan schemes and we have a separate project team in place to deal with business interruption insurance products,” confirms Wright.
Business interruption insurance and bounce back loans
In terms of business interruption insurance, the Financial Conduct Authority (FCA) has taken a test case to the High Court to try to resolve some of the uncertainty, but until the appeals to the Supreme Court have been decided, it is too premature for some decisions to be issued. “But that doesn’t mean that everything is on hold,” says Wright. “We have a large number of cases that aren’t impacted by those terms and clauses that are being taken through the courts, and we are pressing on with as many of those complaints as possible.”
Bounce back loans have similarly created a significant workload. “What things can go wrong? The bank might mislay your application or otherwise cause a material delay in it being processed. It might assess your application in a way that you are not happy with. If you go to a bank that is not your own bank, you might need to open a business current account with that bank first and something might go wrong in that process. All of these things, and many more, can lead to complaints,” he says. “The first step is for the business to take its concerns to its bank. But if there is no resolution, that’s when the business can bring the complaint to us.”
The Financial Ombudsman Service succeeds as an alternative to the courts because it operates with a lower degree of formality, there are rarely legal representatives and the whole process can be relatively quick. But what makes its decisions enforceable?
“We have a two-stage process. The first stage of the process is where the investigator will receive the information needed from both sides, consider the circumstances of the complaint and issue a view. There’s nothing formal at that stage. If either party at that point rejects the view, we can move to the second stage, which is an ombudsman’s decision. If the customer accepts the ombudsman’s decision, it is binding on the financial provider,” he explains.
The Financial Ombudsman Service is very much part of good market-making, but Wright is quick to point out that it is not the regulator – the FCA is. “We help to ensure that consumers and businesses receive good financial services from providers. We achieve that through good decisions,” he says. “However, we also achieve it by sharing our insight on what we’re seeing with firms that are providing financial products and services, and with the regulator, so they can change their practice or change the regulations needed. Our presence also acts as a deterrent to bad practice.”
Changing SME environment
The environment for many small businesses changed significantly last year. Over the last few months, many banks have issued more loans to businesses under the government-backed schemes than they would normally issue over several years – 1.5 million loans. “Many are forecasting a high level of defaults arising on those loans. And where such issues arise, you would naturally expect a number of disputes to follow,” says Wright. “We’re expecting to see disputes from small businesses around these loan schemes for several years to come.” He also reminds us that small businesses generally don’t operate with significant levels of debt. As many businesses are unaccustomed to managing debt, this could give rise to more disputes arising.
“We are here to resolve disputes. So, if you are in business and you have a problem with your bank, insurer or other financial services provider, and if you’ve complained to them about that problem, but you feel that they’ve not been able to address your complaint satisfactorily, then bring your complaint to us,” says Wright.
“And if you are in practice, be aware that clients may have episodes where things go wrong. Don’t forget you can provide added value to your clients by making them aware that they will often be able to bring their complaint to us.”
- Identify any financial support your business may be eligible for at the government’s coronavirus support finder
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- ICAEW’s government coronavirus support calendar