After the fallout of the financial crisis and by December 2011 SMEs in the UK had galvanised themselves and were standing up to their banks. They collectively had a voice through the Bully Banks group, set up, run and organised by SME business people who had realised that the banks had in many cases sold them products for no reason other than the huge bonuses banks offered staff to sell financial products such as structured collars, interest rate swaps, foreign exchange products and various other “add on” incentives.
In June 2012 the financial regulator announced a review. That review was hailed as ground-breaking. It was clear from January 2013 that it was in fact being manipulated by the banks to minimise what redress they would pay out to customers.
There were a number of challenges for UK businesses. One was time-barred cases that could not be issued in Court because the claim was older than six years. This left SMEs the only option of the review process itself and, if that failed, the Financial Ombudsman Service.
The FOS has been very, very strict about ensuring that only eligible people complain through their service. To complain the complainant must either be an individual or they must be a micro enterprise. That is a company that has 9 or fewer employees and a turnover of less than €2 million a year. Fail either or both and you cannot complain. The rule applies to all “linked” entities, which is complex, but essentially all linked companies (subsidiaries or companies that have a shareholder with 25% or more of the company’s shares) are included in the calculation of the number of employees and turnover.
The Government is currently undertaking a consultation on access to FOS for businesses, including a potential redefinition of micro enterprise or an increase in which companies can complain.
This highlights the needs for a proper assessment of cases from the outset and technical guidance on the arguments that will and will not succeed.
At first the FOS rejected almost all IRHP cases. That was changed in October 2013. At first, the FOS had rates of between 50% and 75% in favour of the consumer for IRHPs cases. Unfortunately, that has now dropped.
According to the data out for the period up to and including Q3 2015 the rates found in favour of IRHP complaining people and companies dropped substantially.
For the year to Q3 2015 the rate of cases found in favour of consumers was just 31%. For the Q3 2015 period alone the rate was just 25%. It was 38% in Q1. For the period March 2014 to April 2015 it was 31%.
Why has it dropped? There are essentially a number of components that have led to this. Complainants often do not know how best to structure their complaint. In other cases they have submitted material in the FCA review that is harmful to their case. Also, it should be recalled that many people complaining to FOS in 2014/15 are the very people who have been rejected by the FCA review process. Unfortunately the cases submitted include cases that were never likely to succeed in any case. This highlights the needs for a proper assessment of cases from the outset and technical guidance on the arguments that will and will not succeed.