The Financial Conduct Authority (FCA) has this month confirmed that the services offered by the Financial Ombudsman will be extended to more small and medium-sized businesses.
Under the current arrangements, only individuals or micro-enterprises – defined as organisations with annual turnovers of less than £1.75 million and fewer than 10 employees – can complain to the ombudsman if they have a problem with their banking, insurance or financial advice providers.
But according to “near-final” rules published last week, around 210,000 additional UK SMEs, including charities and trusts, will soon be eligible to complain to the service.
The criteria will likely be changed so that SMEs must only meet the turnover test and one of either the headcount of balance sheet or total tests, rather than all three tests – a turnover of less than £6.5 million a year and fewer than 50 employees or an annual balance sheet of less than £5 million.
The FCA said applying all three tests would “unfairly exclude certain types of SME” – for example, those with a low turnover but more than 50 employees.
It said it expects the final rules on SME extension to come into force on 1 April 2019, which would allow time for the service to recruit additional staff with the skills and experience required.
As part of the announcement, the FCA has published a second 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.
Commenting on the proposed changes. 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 Financial Ombudsman Service 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 changes are an important extension of the ombudsman service’s role and remit. We will work closely with them to ensure that they are ready, so that SMEs are able to benefit from the new rules as soon as they come into force.”