Business Banking Resolution Service Launches New Dispute Resolution Pilot for Larger SMEs: a New Financial Ombudsman Service?
On 1 November 2019, the Business Banking Resolution Service (“BBRS”) launched a new dispute resolution pilot in preparation for the introduction of its new service, which was originally announced in November 2018 by UK Finance, a trade body for British lenders.
The service aims to provide alternative dispute resolution services for “larger” eligible small and medium sized enterprises (“SMEs”) and participating banks, in order to deliver what is said to be stronger and fairer outcomes.
The full BBRS launch will be in early 2020 with a limited, live pilot scheme currently active for selected complaints.
What is BBRS?
BBRS is made up of a variety of business groups and financial institutions. The aim of the group is to resolve disputes between eligible SMEs in the UK and participating banks.
Seven major banks have agreed to participate in the new service, including RBS Group, HSBC, Barclays and Santander UK plc, more may decide to join in the future. These banks will fund the BBRS although it is independently operated, managed and governed. The identity of the BBRS’ full board and Chief Adjudicator will be announced in the next few weeks.
Eligible SMEs are those with a turnover of between £6.5 million and £10 million, and a balance sheet of up to £7.5 million. So the service aims to cover those SMEs who may not be eligible to present their complaints to the Financial Ombudsman Service (“FOS”). The FOS it only covers SMEs with an annual turnover of less than £6.5 million following the jurisdictional increase for eligibility which was effective 1 April 2019 – see our blog post).
BBRS was specifically set up in response to the Simon Walker Review into the complaints and ADR landscape for the UK’s SME market in October 2018. That report sought to understand the difficulties SMEs are faced with when trying to resolve banking disputes, particularly in the aftermath of the Financial Crisis. It provided recommendations on alternative fair and effective routes for SMEs to challenge banks without going to Court.
In response to the Walker review, UK Finance set out a number of proposals to help strengthen the dispute process. Those proposals included:
Creation of a new dedicated SME division, under governance of the FOS and within its legal framework. The division should handle all eligible disputes from small businesses and microenterprises.
Establishment of an expert advisory panel (chaired by a retired judge) to provide high-level guidance and expertise on technical banking and legal issues arising in complex banking disputes.
Establishment of a separate voluntary business ombudsman scheme to consider historic disputed between SMEs and their banks following the Financial Crisis (which have not previously been eligible for other forms of alternative dispute resolution).
How will BBRS work?
The service will help SMEs determine what information is needed to submit a complaint, and will allow BBRS to act as a resolution conduit between the business and the bank. SMEs will have to complain to their bank first before going to the BBRS. It will also seek to achieve a resolution at the earliest possible stage via a number of informal approaches between the two parties. All of this is of course not very different from the FOS’ method of operation.
The BBRS says that it will review complaints in accordance with its five key principles:
Independent: delivering independent decisions on complaints.
Fair: review all relevant evidence and arrive at an outcome that is fair and reasonable for both parties.
Timely: resolve complaints in a timely manner.
Transparent: transparent about the process and how decisions were reached.
Accessible: maintain approachability and no fees.
UK Finance believes that once the pilot is fully operational, 99% of SMEs will have access to either the BBRS or the FOS and 60,000 customers could be eligible for the review of historic cases.
Further forms of ADR in the financial services industry are to be broadly welcomed as they can reduce the cost, time and stress for all participants in fighting disputes through the Courts. They alos reduce the burden on an already stretched Court system
In many ways the FOS has proven to be a successful, and popular, form of ADR, albeit that it is sometimes criticised by firms for a fairly rough and ready approach to justice and in recent times it has been overwhelmed by PPI complaints. So if the BBRS is basing itself on the FOS then it may find itself very busy within months of it launch.
The BBRS may then prove to be useful for resolving disputes in a fair and reasonable way for business that are too large to access the FOS, but which may still struggle with fighting claims through the Courts
The BBRS’ detailed rules are still awaited and it is not clear whether there will be a financial cap on its jurisdiction (the FOS has a limit on the compensation that it can award of £350,000). So this is still very much a case of watch this space for more developments in 2020.