The Financial Conduct Authority (FCA) has today published its proposals for increasing the remit of the Financial Ombudsman Service (FOS) as it launches a consultation on increasing the scope of the FOS.
Only the smallest businesses can currently make a complaint to the FOS. The FCA is proposing to change the definition of ‘eligible complainant’ to include those with a turnover of under £6.5 million and fewer than 50 employees.
Mike Cherry, Federation of Small Businesses (FSB) National Chairman, said: “It’s disappointing that the FCA’s paper is largely silent on the question of bringing more ‘unregulated activities’, including lending to small businesses, into the Ombudsman’s scope. We also need to question why disputes from business owners whose firms haven’t survived are not considered as part of this consultation.
“During the downturn, we had entrepreneurs forced under by complex, unregulated products. They then struggled to achieve redress because their businesses no longer existed. It’s not clear that, under these proposals, there would be enough protection for small businesses if they were faced with similar circumstances in future.
“There are many critical reforms needed that go beyond a simple change in the Ombudsman’s definition of ‘eligible complainant’. We’ll be shining a light on those as we respond to this paper in the coming weeks.
“The FCA estimates that around a fifth of small business disputes are above the current £150,000 Ombudsman award limit so it’s strange that increasing that limit does not form part of its proposals.
“Alongside a much needed expansion of the FOS, we need to give serious consideration to legislating for a separate dispute mechanism. Under the FCA’s proposals, there will still be firms in an unhappy middle ground where they have a case that’s too big for the FOS but they don’t have the necessary resources to go through the courts. That’s where a tribunal could help. It’s also vital that the Ombudsman receives the funding it needs to successfully take on an increased remit.
“The work of the Treasury Committee in recent weeks has helped further uncover a mercenary approach to small firms during the financial crash that destroyed the lives of hundreds of business owners and employees. Putting a definitive end to that culture has to form part of this conversation. Equally, we need to encourage small firms to seek all the finance routes available to them so they understand that bank debt is not their only option.”
Background
1) FCA, Consultation on SME access to the Financial Ombudsman Service p22, 22 January 2018
