Call for Input: SME access to the Financial Ombudsman Service

Call for input survey: SME access to the Financial Ombudsman Service  

Why we are carrying out a call for input  

In 2018 we made rules extending access to the Ombudsman Service for more SMEs. The rules came into force on 1 April 2019. Since then, the Ombudsman Service has received complaints from 4,782 newly eligible SMEs, of which 2,891 related to banking services and 1,835 to insurance.  

We said that we would start a post-implementation review of the impact of the rules within 2 years of the rules coming into force. We postponed the review due to the potential impact of the pandemic on SME complaints. We are now starting the review by launching this call for input. It will feed into the review along with our analysis of independent survey data and data received from partner organisations.   

Our aim is to understand whether current thresholds for SMEs to be able to refer complaints to the Ombudsman Service continue to be appropriate according to our policy objective. Our policy objective is to provide access to the Ombudsman Service to SMEs we think are likely to have insufficient resources to resolve disputes with financial services firms through the legal system.  

We are giving stakeholders the opportunity to feed into this – alongside our inputs into the review detailed below. This is especially important as since we made the policy, the rising cost of living and Covid-19 have affected how some SMEs operate. In addition to general input, we are particularly interested in any changes to the way SMEs operate that we should consider in our review. 

Additional data will we use in the review  

When deciding where the thresholds for the Ombudsman Service should be, we used evidence from the Legal Service’s Board’s (LSB) legal needs of small business survey and the SME Financial Monitor survey carried out by BVA BDRC.  

We said that to measure the expected benefits of extending access to the Ombudsman Service to more SMEs, we would use: 

• the number of cases brought to the Ombudsman Service by newly eligible SMEs 
• the total number of complaints made by SMEs 
• redress payments for SME complaints  
• the number of SMEs engaging with financial services  

In addition to the input from stakeholders, and insight received as part of our day-to-day regulatory work, we will use the latest evidence available from the LSB’s legal needs of small business survey and the SME Financial Monitor survey, together with data collected from the Ombudsman Service and the Business Banking Resolution Service (BBRS) to help our review.  

Current thresholds 

Before 1 April 2019 the Ombudsman Service was only able to consider complaints from micro-enterprises (an enterprise that employs fewer than 10 persons and has turnover or annual balance sheet that does not exceed €2 million). Our rules have meant that since 1 April 2019 the Ombudsman Service has been able to consider complaints made by micro-enterprises and small businesses. A small business is defined as an enterprise which: 

a. is not a micro-enterprise
b. has an annual turnover of less than £6.5 million (or its equivalent in any other currency); and

i.employs fewer than 50 persons; or 
ii. has a balance sheet total of less than £5 million (or its equivalent in any other currency) 

To be eligible to refer a complaint to the Ombudsman Service the complainant needs to have been a micro-enterprise or small business at the time the complaint was made to the firm. 

Activity since the rules were made 

The BBRS launched in February 2021. It is an industry-funded, free and independent resolution service. It resolves disputes between SMEs too large for the Ombudsman Service, with a turnover up to £10million, and 7 participating banks. A complaint must relate to a banking service, such as lending or payment services. The BBRS is due to close at the end of this year.

Who will this call for input be of interest to? 

• providers of regulated and unregulated financial services to SMEs 
• people who are self-employed, own or manage SMEs 
• those who provide business support to SMEs 
• those who represent SMEs 

Call for input survey: SME access to the Financial Ombudsman Service  

Next steps  

This call for input has now closed. We will publish our response once we have reviewed your comments.