Access to Financial Ombudsman Service to be widened

The Financial Conduct Authority says this will bring 210,000 small and medium-sized enterprises, including many charities, into the service's remit

The Financial Conduct Authority is extending access to the Financial Ombudsman Service to more than 210,000 small and medium-sized enterprises, including many charities.

Organisations including charities will have to meet one criterion and one of two others: the main one is a turnover of less than £6.5m a year; they must also have fewer than 50 employees or annual balances of less than £5m. If they meet these criteria, they will be able to refer unresolved complaints such as banking disputes to the ombudsman.

Under the existing rules, only individuals or micro-enterprises – defined as organisations with annual turnovers of less than €2m (£1.75m) and fewer than 10 employees – can complain to the ombudsman if they have a problem with their banking, insurance or financial advice providers. Larger organisations must take any company they have a dispute with to court.

The changes will mean that all but 30,000 organisations are eligible for ombudsman services, according to the FCA.

The proposed changes come after a consultation held in January by the FCA, in which respondents generally supported extending the service.

The FCA said that the criteria for accessing the ombudsman had been changed so that SMEs needed to meet the turnover test and one of either the other two tests, not all three as previously proposed.

The new rules are expected to come into force on 1 April 2019.

A consultation on raising the maximum amount of compensation the ombudsman can require organisations to pay has also been published, and is suggesting that the limit rises from £150,000 to £350,000.

Andrew Bailey, chief executive of the FCA, said: "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 a potentially 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 it to ensure it is ready, so that SMEs are able to benefit from the new rules as soon as they come into force."

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