The Financial Conduct Authority (FCA) has today published a consultation paper proposing to give more small businesses access to the Financial Ombudsman Service (FOS).


Small and medium sized enterprises (SMEs) are businesses employing under 250 staff, or with an annual turnover of under €50m.

In November 2015, the FCA published a Discussion Paper entitled 'Our approach to SMEs as users of financial services' (DP15/7). From the feedback received, the FCA recognises some SMEs do not have the means to resolve disputes with financial services firms and have fewer routes to seek redress. The FCA therefore proposes to change its rules to allow more SMEs to refer disputes to the FOS.

Key points

The rules for complaints handling are contained in the 'Dispute resolution: complaints' (DISP) module of the FCA Handbook. The proposed key changes are:

  • To change the criteria for an eligible complainant so any business which has fewer than 50 employees, an annual turnover below £6.5 million and an annual balance sheet (i.e. gross assets) below £5 million (a SME Borrower) will be able to refer their complaint to the FOS; and
  • Guarantors of corporate loans made to a SME Borrower will be able to complain to the FOS.

The above changes, if approved, would come into effect on 1 December 2018. If these changes are made, it could lead to a wider category of eligible complainants but the current financial limit of £150,000 will remain the same. The consultation also asks for views on what more can be done both within and outside the FCA regulation for SME disputes which are not covered by the proposed changes.

The consultation remains open until 22 April 2018 and the FCA will publish its policy statement in the summer 2018.

The FCA believes these proposals will lead to more SMEs receiving appropriate redress when they have suffered harm because of a financial services firm's actions. If implemented as proposed, firms will also have to change the way they handle complaints from newly-eligible SMEs and guarantors. It is hoped this will lead to fewer complaints in the future.

The FOS has recently published a consultation on its plans and budget for 2018/9. FOS expects its operating costs to rise by around 14% in 2018/9, which will be met by drawing £62.4million from its reserves. FOS warns that “while we’ve again frozen our levy and kept our case fees at the same level for six consecutive years, this isn’t sustainable indefinitely.” With the proposed changes, it appears there will inevitably be an increase in these costs.