Bank Sign logo, Stone Background, England, 2014. SONY A7, 24 MP.A major report has recommended new complaints procedures for Small and Medium Enterprises (SME) which are in dispute with their banks and other lenders.  The report follows widespread alleged misconduct by banks in the wake of the global financial crisis.  It says that many SME’s were sold complex and unsuitable high-risk products that they did not understand.

Simon Walker CBE, independent chair of the UK SME Complaints and Resolutions Review, has called for a tough new complaints regime.  He wants a new division established in the Financial Ombudsman Service (FOS) focused on SME complaints with access to an expert and specialist advisory body involving senior legal, banking and business practitioners.

Mr Walker has additionally called for the banks to set up a voluntary ombudsman scheme to deal with complaints from larger businesses with turnovers of up to £10 million which are not eligible for review by the FOS.  He recommends that the scheme should also deal with legacy complaints which have not been resolved by the courts or arbitration.

In other proposals, the report recommends that data links are set up between the FOS, FCA and government to provide an early warning system against mis-selling.  It also wants banks to establish formal processes for senior managers to hear ‘stories’ from customers and respond openly.

“In the course of compiling this report I have met small business owners – some now bankrupted – who told me they suffered because of poor banking practice over the period of the financial crisis. Their stories represent genuine human, family and business tragedies,” wrote Mr Walker.

He has called for banks to take care to address the imbalances in power between them and SME customers when making loans and taking security over borrowers’ sole residences.

In any dispute between a financial institution and SME, there is a massive power imbalance. Only the richest businesses can contemplate taking a bank to court. A low-cost, rapid and independent vehicle is needed for arbitrating serious disputes between financial organisations and vulnerable companies,” he wrote in the report.

James Burgoyne, Director – Claims & Technical, Brunel Professions said: “Simon Walker’s highly anticipated report recommends a significant strengthening of SME’s hands if they are in dispute with their lenders.  It parallels the Financial Conduct Authority’s recent moves to extend the scope of the FOS to SME businesses.”

UK Finance, which commissioned the review, has published the full report and a press release on its website.  Commentary has been published by law firm CMS Law Now.

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