In a discussion on the BBRS, the House of Commons has outlined how the service failed to restore trust between SMEs and their lenders, or resolve a meaningful number of complaints. MPs also set out some alternative proposals that might achieve these goals.
William Wragg (Conservative) noted that while the expansion of FOS’s remit in 2019 narrowed the gap in provision of financial dispute resolution service for SMEs, it did not close it. He highlighted that the BBRS has been involved in a maximum of 84 financial awards in approximately two years, out of an estimated 60,000 historical complaints eligible for review. Even according to its own data, the BBRS made between £1m and £2m in awards against set up costs of £40m. He argued that if anything, experiences with the BBRS have only further eroded SME trust in the financial services sector. The primary issue identified was the heavily restrictive eligibility criteria, with no indication by the BBRS or participating banks to address it:
- The current point of valuation of turnover is the date at which the complaint was first made by the SME to its bank, allowing the bank to artificially distress companies’ assets to below £1m, and therefore out of scope, before the complaint is made. Instead, the point of valuation should be the date at which the alleged act or omission by the bank occurs;
- Complaints eligible for FOS are not eligible for the BBRS;
- Eligibility regarding size of business thresholds is too strict,; and
- On balance sheet limits, businesses are currently assessed on gross business assets rather than net business assets, a restrictive and illogical system because it represents costs due to be deducted in the short term.
The discussion also criticised the abrupt dissolution of the BBRS liaison panel in March, and the fact that concerns and proposals raised had been ignored or rejected.
Although the idea was not supported by the Walker review that brought about the BBRS, Mr Wragg commended the creation of a financial services tribunal as a solution. He argued that modelling the organisation on employment tribunals could improve the inherent power imbalance between businesses and large financial institutions, and echo the transformation in employer-employee relationships brought about by the employment tribunals.
In response, Andrew Griffith, Economic Secretary to the Treasury, noted that FCA’s call for input – on whether thresholds for SME access to FOS remain appropriate – closed in April and its response is expected shortly. He asked the House to await that response, and suggested that the merits of threshold extension be compared again to that of a statutory tribunal. He highlighted certain disadvantages of the tribunal approach, namely the need for primary legislation and the non-material differences between novel tribunals and ombudsman services which are already established.
Griffith also did not guarantee, as requested by Stewart Hosie for SNP, that there would be no further gaps between the removal of the BBRS, the decision taken on thresholds, and the introduction of another body, statutory or voluntary. He instead referred again to his preference for using as much of the existing dispute resolution framework as possible to avoid such gaps.