FCA decides against expanding access to FOS regime to 'larger' UK SMEs

Financial services experts Anthony Harrison and Jonathan Cavill of Pinsent Masons were commenting after the FCA announced that the thresholds for SMEs to access the FOS will remain unchanged, as the regulator found that the current level of coverage is “appropriate” following its assessment on whether larger businesses should be allowed access to the ombudsman service. 

Anthony Harrison said: “The FCA’s review comes at a key time for SMEs, which are facing sustained inflationary challenges and other significant financial pressures. Free and prompt access to dispute resolution services is therefore vitally important for such businesses that can ill-afford costly legal disputes before the courts when things go wrong.”

“The question is where to strike the right balance between, on the one hand, ensuring those SMEs with limited resources have access to the FOS and, on the other, not opening the gates up so much that well-resourced businesses start to use the FOS system when they might otherwise have sufficient means to go to court,” he said.

In 2019, the FCA introduced rules extending access to the FOS to more SMEs. As a result, SMEs with an annual turnover of less than £6.5m and fewer than 50 employees, or a balance sheet total of less than £5m, can now refer complaints about financial services firms to the service. Previously, SMEs with 10 or more employees and annual turnover or balance sheet of more than £2m were not eligible.

According to the FCA, the thresholds introduced in 2019 cover 99% of the 5.6 million private sector businesses in the UK, and “it would not be proportionate to extend access to SMEs larger than the current criteria”.

Jonathan Cavill said: “The FCA’s decision to keep the thresholds unchanged strikes a sensible balance for the moment. The data suggests that the vast majority of small businesses can access the FOS should they need to. So this isn’t a situation where there is a large tranche of businesses that are too big to access the FOS but too small to have the resources to engage in court disputes.”

He added that the review should also be considered in the context of the FOS itself, which has ambitious targets to reduce its caseloads and waiting times for customers.

“To allow access to larger SMEs with more complex disputes could place disproportionate burdens on the FOS and hamper its ability to deal with ‘bread and butter’ complaints from consumers and smaller businesses which are currently within the thresholds,” he said.