A free service to resolve disputes between small and medium enterprises (SMEs) and their banks has been launched in the UK.
The Business Banking Resolution Service (BBRS) will seek to resolve both contemporary and historical complaints against banks relating to banking services, under two schemes.
The contemporary scheme handles incidents taking place after 1 April 2019. The historical scheme will handle complaints relating to incidents taking place between 1 December 2001 and 31 March 2019 and will close to new complaints on 14 February 2023.
To be eligible, SMEs must meet criteria relating to their turnover, with maximum and minimum turnover levels varying depending on when the incident took place and when a complaint was made. Complaints must not have gone through litigation or been settled, and only customers of the seven participating banking groups can use the scheme.
Contentious financial services expert Jonathan Cavill of Pinsent Masons, the law firm behind Out-Law, said the BBRS could benefit both banks and SMEs.
“The new BBRS looks likely to have a material role to play for SME complainants against relevant banks where the Financial Ombudsman Scheme [FOS] does not have jurisdiction. Whilst this looks to assist SMEs, there are practical benefits to participating banks, as the scheme would assist in preventing litigation,” Cavill said.
Cavill said there were some areas which should be kept under review by firms and the BBRS as the scheme begins operating.
“The BBRS should be cautious about caseloads and complexity of disputes, particularly around eligibility and jurisdiction. We have of course seen the FOS and Treasury Select Committee confirm recently that the FOS has become overwhelmed by cases, both in terms of volume and complexity,” Cavill said.
“It is possible that the BBRS will encounter similar challenges – particularly as SMEs may become increasingly litigious as they seek to mitigate business losses caused by the Covid-19 pandemic. Obviously, the scheme was designed before the pandemic, and so it will be crucial to see what mechanisms are now put in place, hopefully now, to manage these risks,” Cavill said.
Cavill said ‘concessionary’ or ‘boundary’ cases would be likely to be “vigorously contested”. These are cases which have been considered or were eligible for consideration by specific independent reviews.
While normally excluded from the BBRS, there are some exceptions such as where the SME alleges that material new evidence had not been assessed by the previous review, or that the SME did not have notice, or could not reasonably be expected to have notice, of that previous review.
The All-Party Parliamentary Group (APPG) on Fair Business Banking said it was content that the service had the ability to determine fair and reasonable outcomes for small businesses which fall in its scope.
“This sign off is, however, conditional, as concerns remain about the commitment of the banks to resolve historic complaints. Good faith has been enshrined in the agreements between the banks and the BBRS, and we will be taking part in a post-implementation review of the service,” the APPG said in a statement.
The group added that it was important for the BBRS and banks to embrace the scheme’s principle of restoring trust between banks and businesses. It said it was critical for the BBRS to be a learning organisation, and this would only be tested with sufficient numbers of boundary cases going through the scheme.
Cavill said: “All in all, whilst the scheme is likely to be welcomed, there will no doubt be early teething issues to overcome. A healthy amount of foresight by the BBRS - drawing on some of the challenges the FOS has experienced – will be needed.
“The future independent review of the efficacy of the BBRS will most likely touch on areas for improvement,” Cavill said.
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