Financial Conduct Authority consults on widening access to the Financial Ombudsman Service for small businesses

At the moment only individual consumers and around 5.5 million micro-enterprises (the smallest type of business) can access the Ombudsman if they have a dispute with a financial services firm. Businesses that cannot access the Ombudsman would need to take the firm to court. However, the FCA believes that many smaller businesses within this group struggle to do so in practice.

Under the changes proposed by the FCA, approximately 160,000 additional SMEs, charities and trusts would be able to refer complaints to the Ombudsman. This would be done by changing the eligibility criteria to access the Ombudsman, so businesses with fewer than 50 employees, annual turnover below £6.5 million and an annual balance sheet (i.e. gross assets) below £5 million would become eligible.

As long as a complainant is eligible, the Ombudsman can consider complaints about any regulated activity; it can also consider complaints about some unregulated activities, such as, lending to companies or the activities of business turnaround units.

The FCA also proposes to extend eligibility to personal guarantors of corporate loans, provided the borrowing business also meets the eligibility criteria.

Andrew Bailey, Chief Executive at the FCA, said:

'It is important for everyone, including financial services firms, that there is an effective dispute resolution mechanism for businesses. Our evidence suggests some small businesses currently find it hard to achieve a fair outcome in disputes with financial services firms because court action is not a realistic option for them.  We have considered what could be done within our powers and the remit of the Financial Ombudsman Service to improve this situation and are proposing to expand access to the Ombudsman.'

The FCA proposals focus on the Financial Ombudsman Service because of its expertise in the financial services sector and the FCA’s statutory role in relation to it. More material changes, such as changing the basis for the way the Ombudsman makes decisions to enable it to deal with significantly higher value disputes, would require legislation, which only the Government can introduce. 

The FCA is asking for responses to the consultation by 22 April 2018 and intends to publish a Policy Statement making final rules in summer 2018.

Notes to editors

1. CP18/3: Consultation on SME access to the Financial Ombudsman Service and Feedback to DP15/7: SMEs as Users of Financial Services
2. The FCA’s Discussion Paper 15/7: Our approach to SMEs as users of financial services
3. In April 2017, the FCA launched a consultation on its future mission. We have published a summary of the responses we received in this feedback document which committed to publishing a formal consultation and feedback statement on SMEs’ access to redress.
4. Currently businesses with 10 or more employees and annual turnover or annual balance sheet (i.e. gross assets) above €2m, cannot refer complaints to the Ombudsman. Charities with income over £1m and trusts with net assets above £1m are also ineligible.
5. Alongside small businesses, we are proposing to make charities with income up to £6.5m and trusts with net assets up to £5m eligible to refer complaints to the Ombudsman.
6. On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
7. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
8. Find out more information about the FCA.