Complaining to the Financial Ombudsman to be made easier for SMEs

Over 200,000 more small businesses will soon be able to make use of the Financial Ombudsman Service, says David Prosser.


Thousands of small businesses in dispute with financial-services companies will soon have access to a statutory complaints service. The Financial Conduct Authority, the chief City regulator, is to extend significantly the remit of the Financial Ombudsman Service (FOS) so that it covers more than 200,000 small and medium-sized enterprises (SMEs) not currently entitled to use the system.

The FOS, best known for providing a free dispute resolution service for consumers with a complaint about firms such as banks, insurers and investment managers, already accepts complaints from "micro enterprises". But for now any firm with more than ten employees or assets of more than €2m falls outside the scheme's remit.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

From next April, however, the FCA will change the rules to allow much larger businesses to complain to the FOS. Any firm with an annual turnover of less than £6.5m, fewer than 50 employees, or assets of less than £5m will be entitled to bring a complaint to the service. The changes will give an additional 210,000 SMEs access to the scheme, estimates the regulator.

Breakthrough for SMEs

The announcement marks a significant breakthrough for SMEs. Although the FOS's remit only extends to regulated financial services, many smaller businesses have found it very difficult to make a successful complaint about such companies. The banking sector, in particular, has been involved in a series of high-profile scandals where SMEs have lost out.

Advertisement - Article continues below

Moreover, while small businesses do already have the option of taking legal action against financial-services companies, the cost of doing so is very high. Even where UK SMEs are successful in such cases, the cost of bringing a claim accounts, on average, for 44% of its value, according to research from the World Bank.

The FCA's plans are in line with recommendations made last week by Simon Walker, the former head of the Institute of Directors, who was commissioned by the banking industry to investigate possible means for providing SMEs with simpler access to redress. Walker's review rejected calls for a tribunal system to intervene in disputes between small businesses and their banks, arguing in favour of an increased role for the FOS. A second recommendation from the review, a voluntary ombudsman scheme for SMEs with an annual turnover of between £6.5m and £10m, has yet to be adopted by the banks.

Meanwhile, SMEs are also beginning to exercise new rights to complain about late payments. The Small Business Commissioner, set up by the government last year, has begun to intervene in late-payment cases. The service accepts complaints from SMEs with fewer than 50 employees about delayed payments from large businesses based in the UK. Roughly 5.7 million SMEs are entitled to complain to the commissioner, estimates the government.



Small business

Small business: how to chase late-paying customers

Many small business have trouble getting their customers to pay up on time. Here's what you can do about it.
23 Jan 2020
Small business

How to start exporting with your small business

Small businesses aren’t exporting enough. They need to do their homework, says David Prosser
19 Feb 2020
Small business

Beware the rogue energy suppliers

Ofgem has warned small businesses to be on their guard against rogue “energy brokers” flogging poor-value gas and electricity contracts.
18 Feb 2020
Small business

How to monetise your company's website

If your company has a website, make sure it’s attracting visitors
5 Feb 2020

Most Popular

Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020

The euro’s slide against the US dollar looks set to continue

The euro has been in a bear market against the US dollar for two years now. And on a broader scale since 2008. A decline like that is telling us somet…
19 Feb 2020
UK Economy

Britain’s economy might spring a surprise on the doomsayers this year

The UK economy is looking pretty good – we’re more at risk of a boom than a bust, says John Stepek. Here’s why, and what it means for your portfolio.
20 Feb 2020

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020