More SMEs given access to Financial Ombudsman Service
The Financial Conduct Authority (FCA) has confirmed plans to extend access to the Financial Ombudsman Service (FOS) to more SMEs, which would see around 210,000 additional UK SMEs eligible to complain to the ombudsman
22 Oct 2018
The changes will mean that SMEs with an annual turnover below £6.5m and fewer than 50 employees, or an annual balance sheet below £5m, will now be able to refer unresolved complaints to FOS. The new rules will also apply to charities with income up to £6.5m and trusts with net assets up to £5m.
Respondents to the FCA’s January 2018 consultation strongly supported the extension of the ombudsman service to larger SMEs, charities and trusts, and a new category of personal guarantors.
The criteria for access to the service have been amended so that SMEs must only meet the turnover test and one of either the headcount or balance sheet total tests, not all three tests as previously proposed. The FCA made this change in response to feedback that applying all three tests would unfairly exclude certain types of SME, for example those with relatively low turnover but 50 or more employees.
Andrew Bailey, chief executive of the FCA said: ‘We recognise it is vitally important for SMEs to have a mechanism to resolve disputes and we are clear the FOS is the right route for this.
‘The changes we are making are as far as we think we should go within our powers, but they will provide access to the ombudsman service for a significant number of smaller businesses. Before this their only option was potentially a costly legal one through the courts.’
The FCA has published near-final rules, so the ombudsman service can start taking practical steps towards putting the extension of its remit in place, including starting recruitment of additional staff with the skills and experience required.
The FCA intends to publish final rules later this year, following its normal scrutiny of the ombudsman service’s draft business plan and budget. The final rules on the SME extension are expected to come into force on 1 April 2019.
Together with the near-final rules, the FCA has published a consultation on raising the maximum amount of compensation the ombudsman service can require financial services firms to pay out from £150,000 to £350,000. The deadline for comments is 21 December.
Report by Pat Sweet