More SMEs will be able to settle legal disputes for free from 2019



22.10.2018 08:14

More small and medium sized enterprises will be able to settle legal disputes for free through the Financial Ombudsman Service after the city watchdog approved plans to extend its remit.

Under plans to raise qualifying thresholds, SMEs with an annual turnover below £6.5million, fewer than 50 employees, or an annual balance sheet below £5million, will be able to refer unresolved disputes with financial services firms to the Ombudsman service.

The changes to Ombudsman service’s eligibility criteria is set to come into force on 1 April 2019. 

The city watchdog has come under increasing pressure to implement a redress service for SMEs that can't afford to take their grievances to court because of legal fees

At present, such firms can only pursue redress when firms have treated them poorly through the courts, but hefty legal fees makes it uneconomical for many to do so.  

The Financial Conduct Authority estimates that an additional 210,000 UK SMEs will be able to complain to the ombudsman under the new rules. 

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.'

The new rules will also introduce broadly equivalent eligibility criteria for charities and trusts. 

Why has this happened?

Noel Edmonds is suing Lloyds Banking group over a scam involving staff at an HBOS office in Reading 10 years ago

The World Bank estimates that taking a dispute to court might cost an SME in the UK up to 44 per cent of its claim.

As a result, the City watchdog has come under increasing pressure to implement a redress service for larger SMEs that can't afford to take their grievances to court because of legal fees. 

In addition, the change comes after a campaign by our sister publication the Mail on Sunday's Justice For Our Firms calling for a tribunal and an Ombudsman for small firms.

This followed a high profile case brought against Lloyds Banking Group by TV star Noel Edmonds over a scam involving staff at an HBoS office in Reading, which he alleges destroyed his business Unique Group a decade ago.

The fraud scandal saw corrupt financiers from HBoS jailed last year for the £245million scam which affected around 60 small business owners.

What is left outside the scope? 

Disputes not covered include those involving SMEs above the new eligibility threshold for the ombudsman.

Larger SMEs will have the bargaining power, organisational resources and understanding of financial services to protect their interests in disputes with firms, according to the city watchdog.

In addition, the directors or former directors of a company in insolvency proceedings or that has been dissolved won't be able to refer complaints on its behalf to the ombudsman. This applies to micro-enterprises that are already covered by the FOS.

What can larger SMEs expect to get?

The ombudsman can recommend any amount of redress up to its binding and enforceable award limit of £150,000 (although the FCA has proposed increasing this to £350,000).

Any amounts above this limit are voluntary and it is up to firms whether or not they pay the higher amount. 

How to complain to the FOS

The ombudsman says the first step is to give the business you’re unhappy with a chance to put things right. They have to give their final response within eight weeks at the most, depending on what you’re complaining about.

If you’re unhappy with the firm's response, you can contact the ombudsman via phone, post and online. You can find more information here.

Steps to take before taking your complaint to the FOS 

1. Try first to contact the person you originally dealt with

If they can't help, say you want to take matters further. Ask for details of the official complaints procedure and the name of the person who will be handling your complaint.

2. Put your complaint in writing or by phone

If you don't feel comfortable putting your complaint in writing, you could ask a friend, carer, family member or an organisation like Citizens Advice to help you.

If you are putting things in writing, write 'complaint' at the top of your letter. And make sure you include important details like your customer number or your policy or account number.

Keep things brief and to the point. Set out the facts clearly and in a logical order. 

Say why you're not happy and what you want the business to do about it. This will make it easier for them to look into the problem and sort things out.

Send copies of any relevant paperwork that you believe backs up your case. Keep a copy of any letters between you and the business. You may need to refer to them later.

Or you can make your complaint by phone – but make sure you ask for the name of the person you speak to and their job title. Keep a note of this, with the date and time of your call – and what was said. You may need to refer to this later.

3. Try to stay calm and polite 

This will help you to explain your complaint as clearly and effectively as possible.

4. Don't always expect immediate results 

Some complaints may take time to investigate properly and resolve. And depending on what you're complaining about, the business may have up to eight weeks to sort out the complaint itself.

Source: the Financial Ombudsman Service


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