UK’s new SME dispute scheme gets disputed
SMEs in the UK could soon get their banking and finance disputes reviewed and dealt with through alternative dispute resolution (ADR) arrangements.
However, even this is disputed as not everyone is satisfied. Kevin Hollinrake MP, and part of the All-Party Parliamentary Group on Fair Business Banking, says the caps on payouts are too low.
He explains that the new scheme “will still leave the courts as the only way for some victims of banking misconduct to access justice, but it is virtually impossible for most people to sue a bank”.
According to trade body UK Finance, SMEs with a turnover between £6.5 million and £10 million and a balance sheet up to £7.5 million will be in line for this scheme, following the creation of a specialist ombudsman service with the “expertise and powers to address larger and more complex cases for eligible SMEs”.
This plan is in response to the recommendations of Simon Walker’s (the former director general of the Institute of Directors) independent review about ADRs for SMEs – which was commissioned by UK Finance.
These proposals have been developed with the agreement of seven SME banking providers – Barclays, CYBG, Danske Bank, HSBC UK, Lloyds, Royal Bank of Scotland (RBS), Santander UK.
Stephen Jones, UK Finance CEO, says: “SMEs are essential to the success of our economy. It’s therefore vital that lessons are learned from incidents of poor treatment of SMEs by the banking industry and that future redress schemes are fit for purpose.”
Some of the proposals include support for the extension of the scope and capability of the Financial Ombudsman Service (FOS). UK Finance says under this expansion, 99.5% of all SMEs would be able to access an independent complaints review.
In addition, this new scheme will recommend appropriate awards for redress, which will be binding on banks up to a new higher level of £600,000 (meaning the bank cannot appeal any award up to this threshold).
UK Finance says the steering group will be established and commence work in December 2018. It will seek to work with the co-chairs of that All-Party Parliamentary Group and small business representatives.
The industry is aiming to implement these voluntary ombudsman arrangements by September 2019.