On 23 October 2018 UK Finance published a review into the complaints and alternative dispute resolution (ADR) landscape for the UK SME market by Simon Walker CBE, former Director General of the Institute of Directors (IoD), Professor Christopher Hodges and Professor Robert Blackburn.
Summary of main recommendations
- The main recommendation is to create a separate division of the FOS under its current legal framework directed squarely at SMEs. This division should have appropriate experience in dispute resolution to gain the confidence of a wide SME audience.
- The new division should be supported by an expert and specialist advisory body involving senior legal, banking and business practitioners to advise and give guidance on technical, legal and banking issues where required. It is suggested that this advisory board might be chaired by a retired judge.
- The extension of eligible complainants to the FOS following the FCA's consultation on SME access should be implemented. Dentons – Changes to the Financial Ombudsman Service
- For businesses outside of that extension, banks should agree to establish a mechanism for a voluntary ombudsman scheme for businesses with a turnover of between £6.5 million and £10 million.
- Banks should consider whether to establish a voluntary scheme for those legacy bank disputes that have arisen since the Financial Crisis, but not to include those that have already been dealt with by a court, tribunal, arbitrator or other external dispute resolution scheme.
- Once the new banking ombudsman regime has bedded down (say two years after it has been created, and subject to its satisfactory operation), the size of business within its scope should be reviewed, and its binding authority to make an award be raised to a limit of £600,000.
- Data monitoring and feedback to the FCA should be implemented in order to deal with prevailing issues and provide an early warning system against future problems.
- A monitoring council that brings together SMEs, the FOS, lenders and the Lending Standards Board and others to act as an early warning mechanism should be established.
- A formal process should be agreed that provides an opportunity for customers to be heard by the most senior management of UK banks, and banks be given the opportunity to respond openly so that all parties understand what happened, to acknowledge the pressures and the wider hurt suffered and to arrive at reconciliation and closure.
- As part of this process, special attention should be given to measures to address the balance between banks and business customers. Australian measures, including a requirement for a plain language summary and the prohibition of calling in debt on the basis of loan-to-value covenants where all payments have been kept up to date, should be considered.
- UK banks should commit not to on-sell debt to institutions that are not signatories to the Lending Standards Board's code of practice, unless they will commit to maintaining equivalent standards. The sector should urge all debt collection agencies and debt purchase firms to register with the Lending Standards Board.
- UK banks should commit to showing restraint in taking security for a business loan on the sole residence of a borrower.
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