The Business Banking Resolution Service (BBRS) was launched on 15 February 2021. We consider its potential impact for banks and their customers.
What is the BBRS?
The BBRS is an independent, alternative dispute resolution service. It has been created to allow small and medium sized enterprises (SMEs) to resolve complaints with their banks. Previously, SMEs had two options. Lower value claims could be referred to the Financial Ombudsman Service (FOS), which is available to businesses with a turnover of up to GBP 6.5 million and either fewer than 50 employees or a balance sheet total of less than £5m. Alternatively, for claims of higher value or otherwise outside the remit of the FOS, resolution was via litigation in the courts. The BBRS presents a new route, of interest where the FOS is not an option and where the preference is to avoid potentially costly litigation.
Which banks have signed up?
To date, seven UK banks have signed up to BBRS. The banks are: Barclays Bank PLC and Barclays Bank UK PLC; Danske Bank; HSBC UK Bank plc; Lloyds Banking Group (Lloyds Bank plc and Bank of Scotland plc); NatWest Group (including The Royal Bank of Scotland Plc, National Westminster Bank plc, Coutts & Company and Ulster Bank Limited (Northern Ireland)); Santander UK plc; and Virgin Money (including Clydesdale Bank PLC and Yorkshire Bank).
What complaints are eligible?
Only ‘eligible’ customers of the aforementioned banks may submit a claim. Amongst other requirements, a (potential) claimant must be:
- A sole trader or business organisation that is – or was at the time of the matter(s) alleged in the complaint – a business customer of the participating bank in question; or
- A personal Guarantor of one of the above; or
- A Recognised Assignee of one of the above – including a partner or director; or
- A Dissolved Business Entity which was, at the time of the matter(s) alleged in the complaint, a business customer of the participating bank in question.
The complaint must also relate to a banking service, such as payment services or lending services. FOS has a wider remit, being able to investigate complaints in a range of financial matters including, amongst others, banking, pensions, and insurance. SMEs should be alert to time limits; FOS will only look at a SME complaint if it relates to an event which occurred on or after 1 April 2019, and where not more than six months have passed since the bank’s final response. Both BBRS and FOS can assist SMEs in understanding for which service they may be eligible.
How will complaints be dealt with?
The BBRS has developed two schemes to categorise complaints:
- A ‘historical’ scheme: covering cases from 1 December 2001 to 31 March 2019 for businesses with a turnover up to £6.5 million per annum; and total assets up to £5 million; and
- A ‘contemporary’ scheme: covering cases from 1 April 2019 onwards for businesses with a turnover up to £10 million, and total assets up to £7.5 million.
A maximum turnover of £6.5 million is common to both FOS and the BBRS historical scheme’s requirements. Whilst there is overlap between the financial criteria of the FOS and the BBRS historical scheme, the latter provides a new route for SMEs with complaints pre-dating 1 April 2019, which fall outside the scope of FOS jurisdiction. Ultimately, both BBRS schemes are available only to complaints which are not eligible for FOS determination, and which have not had access to an independent review. The BBRS has, however, stated its willingness to be flexible and to consider cases which are deemed ‘ineligible’ under the above rules.
The intention is that external legal support is not required, although parties to a complaint are free to seek legal advice at their own expense. Each business using the BBRS will have access to a ‘Customer Champion’ who will assist the SME in gathering evidence, creating a case file, and may suggest potential courses of action to both parties where appropriate. The Customer Champion is employed by the BBRS and will act as the main point of contact for complainants and the banks. The Customer Champion will not offer legal advice to SMEs.
Decisions will be made by a Case Assessor on the ‘basis of what is fair and reasonable in the particular circumstances of each case’. Financial awards of up to £600,000 may be made on the contemporary scheme (£350,000 for the historical scheme), with the option for the service to recommend higher awards if appropriate. Non-financial awards are also available. For example, in the event that a bank’s mistake results in a late payment to a supplier, the BBRS could request that the bank provide the SME with a letter which can be shown to the supplier explaining that the delay was the bank’s fault. Non-financial awards may be recommended alongside a financial award or as standalone compensation.
How might the BBRS change dispute resolution for banks and their customers?
The potential advantages of BBRS (over the courts) are chiefly financial. Users of BBRS do not have to pay a fee for the service, and are under no obligation to use legal advice in pursuing or responding to a complaint. The options for determination available are varied, ranging from settlement, mediation (whether formal or informal), or adjudication.
For customers, the service offers the potential to recover more than is available via the FOS, through a service which is geared up to use industry knowledge and experience to deal with complex disputes.
For participating banks, the BBRS offers the chance of a formal, independent dispute resolution mechanism outside the courts and without the need to incur significant legal cost.
Of particular relevance at the moment, the BBRS has confirmed that it will hear eligible complaints relating to the Coronavirus Business Interruption Loan Scheme (the 'Scheme'). Launched in Spring 2020, the Scheme’s objective was to provide SMEs with access to loans and other forms of finance partially guaranteed by the British government over the course of the coronavirus pandemic.
It is hoped that the BBRS will increase confidence for SMEs in dealing with banks and accessing lending. This will be of particular importance in the current climate, given the impact on business of the coronavirus pandemic and the changes wrought by Brexit.