FCA considers granting FOS access to more small businesses

The FCA has called for views on whether more small and medium-sized enterprises (SMEs) should be granted access to the Financial Ombudsman Service (FOS).

The regulator is also asking whether the amount of redress the FOS can order financial services firms to pay should be increased from the current limit of £150,000.

This is part of a wider call for views on whether the regulator affords enough protection generally to SMEs when they buy financial services.

FCA director of strategy and competition Christopher Woolard said: “Small businesses are a vital part of the UK economy.

“We need to consider whether we’re doing our part in delivering an effective, proportionate regulatory framework that gives them the confidence required to use the financial services they need to grow.”

He added: “We want people to tell us whether our rules are appropriate: do they strike the right balance between protecting small businesses and encouraging firms to offer services to SMEs, to compete and to innovate?”

The FCA said that currently only a small minority of SMEs are unable to take complaints to the ombudsman.

But it added that those businesses unable to use the FOS account for “a substantial share” of the sector’s demand for financial services, and some of them are likely to be less experienced dealing with financial products and services despite their greater size.

The FCA is also considering whether the financial services industry could use voluntary standards such as the Lending Code to further improve the experience of small businesses, and asks what the high-level ambition for such codes should be.

The regulator has made the call for views following ”a number of issues”with the way some financial services firms have treated their SME clients, and the provisional findings of the Competition and Markets Authority (CMA) into retail banking.

The FCA said its own research has found that complex products, limited choice and poorly managed expectations may expose SMEs to risk, and so can cognitive and behavioural biases.

It added that when things go wrong, SMEs may experience complex and escalating problems, and may struggle with the complaints and claims processes.