The Financial Conduct Authority (FCA) yesterday confirmed plans to extend access to the Financial Ombudsman Service (FOS) to more small and medium-sized enterprises (SMEs).
As the rules currently stand, businesses only qualify to use the free ombudsman service if they have:
- Fewer than 10 staff; and
- An annual balance sheet of up to €2m.
Under the new plans, SMEs will be able to refer complaints to the FOS if they have:
- An annual turnover of up to £6.5m; and
- Fewer than 50 staff or an annual balance sheet below £5m.
This extension means that around 210,000 additional UK SMEs will be eligible to complain to the FOS. The FCA estimates that only 30,000 UK SMEs will not be eligible to complain to the FOS.
The changes follow the FCA’s Consultation Paper CP18/3 published in January 2018. A significant majority of respondents to that consultation agreed with the principle of giving larger SMEs access to the FOS.
The FCA anticipates that the extension will come into force on 1 April 2019. It has published near-final rules on the extension, so the FOS can start taking practical steps towards putting the extension of its remit in place (including starting recruitment of additional staff with the skills and experience required) and intends to publish final rules in December this year.
Together with the near-final rules, the FCA has also published a Consultation Paper (CP18/31) proposing that the maximum amount of compensation that the FOS can require firms to pay out be raised from £150,000 to £350,000 for complaints about firms’ acts or omissions that happen on or after 1 April 2019. The FCA also propose to increase the existing £150,000 limit to £160,000 for complaints about acts or omissions which occur prior to 1 April 2019. Both award limits would be adjusted each year in line with the Consumer Prices Index. The FCA has requested that comments on this Consultation Paper be submitted by 21 December 2018.
For more information:
- A full copy of the FCA’s policy statement including the near-final rules can be accessed here.
- Consultation Paper CP18/31 (“Increasing the award limit for the Financial Ombudsman Service”) can be accessed here.
If you would like to receive the authors’ detailed analysis of how the change is likely to affect firms in practice and the measures they should be taking now, please contact them directly.