Small businesses will be able to resolve disputes with banks through an independent adjudicator from next year, as the Financial Conduct Authority (FCA) confirmed the extension of its ombudsman service.
Companies with an annual turnover below £6.5m and fewer than 50 employees, or an annual balance sheet below £5m, will be able to access the service by the end of next year.
Small and medium-sized enterprises (SMEs) must meet the turnover test and either the balance sheet or employee criteria to be eligible.
The announcement came as the FCA began a consultation into more than doubling the amount of compensation the ombudsman can order financial services firms to pay out from £150,000 to £350,000.
The proposals gained a cautious welcome from MPs, although some said they do not go far enough. The All-Party Parliamentary Group on Fair Business Banking said the extension was "only part of the puzzle", calling for a financial services tribunal to be established. The group has been a vocal campaigner on the rights of small businesses in the aftermath of scandals such as Royal Bank of Scotland's now infamous global restructuring group (GRG), which was accused of deliberately squeezing high fees from small business clients.
Kevin Hollinrake, co-chair of the group, said: “This is a good first step in the right direction, but taken alone it is not enough. It is now up to the Government to step up to the plate by introducing a Tribunal that ensures that a holistic solution is found that provides access to justice for businesses in the UK”.
FCA chief executive Andrew Bailey 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. Before this their only option was potentially a costly legal one through the courts.
“The changes are an important extension of the ombudsman service’s role and remit. We will work closely with them to ensure that they are ready, so that SMEs are able to benefit from the new rules as soon as they come into force.”