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Resolving SME banking disputes amid worsening economic conditions

Author: ICAEW Insights

Published: 12 Jul 2023

With stormy economic waters ahead, complaints against banks are likely to rise, says Dirk Paterson, Customer Director at the Business Banking Resolution Service. Here he looks at how his organisation can help.

When things go wrong with their banks, SMEs are most likely to come to their accountant for advice. The Business Banking Resolution Service (BBRS) is a free, not-for-profit organisation that helps SMEs with a turnover above £6.5m and less than £10m to resolve banking complaints. 

If they’ve already registered a complaint with their bank and haven’t resolved it, accountants can refer clients’ banking complaints to the BBRS. It’s expensive to go to court, so eligible clients can have their complaints examined without having to take their bank to court. The service is free and it’s easy to register a complaint on the BBRS website.

Our research suggests there are stormy waters ahead for some SMEs given inflationary pressures and the rising costs of doing business. In these unsettled economic conditions, complaints against banks are likely to rise, so it’s important that accountants can help ensure SMEs are aware of our free service. 

We commissioned research, published in April 2023, which asked 522 senior business decision makers at UK companies with an annual turnover of between £5m and £15m if their businesses were likely to face challenges in 2023.

According to our survey, despite the wider financial and economic pressures, SME banking satisfaction rates are high. More than four-fifths (86%) of SMEs said they were satisfied with their business banking service, compared to just 10% who were neutral, and only 3% who said they were dissatisfied. 

These findings suggest that most of the SMEs we surveyed have a good relationship with their bank. However, there needs to be provision to resolve disputes as we enter a period of increased economic uncertainty. 

SME economic concerns

The research revealed that two-fifths (41%) of UK SMEs believed their business may be in financial difficulties in a year’s time, while a small minority (3%) expected to wind down. Equally concerning, one in six (16.5%) of SMEs said that they expect to fail to meet their debt obligations over the next 12 months.

Of the SMEs that have made a banking complaint, a quarter (24%) have not been resolved, with the majority of those being minor issues.

Our work so far

The BBRS was designed to complement the work of the Financial Ombudsman Service, so smaller SMEs and micro-enterprises who are ineligible to register with the BBRS may find themselves eligible for the FOS for small businesses scheme. 

For the past two years, the BBRS has been servicing the small group of cases sitting above the eligibility of the FOS, but not big enough to go to the courts. As of 31 March 2023, the BBRS has resolved 92 cases, of which 75 received a financial settlement and 17 received a non-financial settlement.

Of those who received a financial settlement, 25 were the result of adjudications, the more formal scheme for resolving disputes at the BBRS, and 50 were settled directly between the parties following BBRS involvement. 

Substantially more than £1m of financial awards have been made to SMEs since the BBRS launched. When cases move to direct settlement between the SME and bank following BBRS intervention, sometimes the agreed redress amount is not disclosed to the BBRS, so this figure is likely to be significantly higher.

Non-financial awards, while not contributing to the total amount of redress paid out, often represent important resolutions for customers. For example, BBRS intervention has led to the rearranging of lending terms and conditions, discharges from personal guarantees, and debt recovery rearrangements.

How we can help

Our survey of 750 small business leaders in 2021 found that 44% of SMEs go to their accountants for advice on business banking, 35% to financial advisers, and 33% to banks. Others turn to their solicitors (22%) and online research (17%).

The BBRS is currently funded to continue until the end of the 2023, and while we hope that there will be continued provision for SME dispute resolution in the years to come, there is no time to spare for your clients in registering with us.

Are your clients eligible for the BBRS? 

In order for accountants to advise their clients, it might be useful to understand the range of dispute resolution options available to small businesses.

The BBRS launched in 2021. It is an industry-funded response to the Walker Review, which recommended providing a service for SMEs that are too small to typically take their banking issues to court. Eligible SMEs must have already taken their complaint to their bank but have an issue that remains unresolved. The BBRS investigates complaints regarding banking issues that took place on, or after, April 2019. You can view the full criteria for our scheme on our website

We’re asking accountancy firms to consider whether you, or any of your clients, could benefit from registering a complaint with the BBRS. It’s free to do so and SMEs that think they may be eligible for our service can register with us by phone, email or online chat by visiting our website

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