UK: UK Banks Commit To Dispute Resolution Processes For Larger SMEs, Including Legacy Complaints

Last Updated: 20 December 2018
Article by Clare Stothard, Beth Lovell and Karen Jacobs

In March 2018, UK Finance commissioned an independent review of the complaints and resolution landscape for UK SMEs from Simon Walker CBE, Professor Christopher Hodges and Professor Robert, who published their report in October 2018 (the Walker Review). The Walker Review focused primarily on those SME disputes that remain unresolved through existing complaints procedures and may be unsuitable for court process. In order to achieve fair outcomes for this group, the Walker Review made a number of recommendations for the settlement of future disputes as well as suggesting ways of bringing closure for past disputes, which the leading banks have now largely agreed to adopt.

The Financial Ombudsman Service

In our article Changes to the Financial Ombudsman Service (FOS) we explained that the FCA was:

  • undertaking a consultation on increasing the FOS's monetary award limit in April 2019 from its current level of £150,000 to £350,000, for complaints in relation to acts and/or omissions taking place after that date; and
  • increasing access to the FOS for SMEs with an annual turnover of £6.5 million and either an annual balance sheet total of under £5 million or fewer than 50 employees (currently, only micro-enterprises are eligible, being those with fewer than 10 employees with a turnover or annual balance sheet not exceeding €2 million).

The FCA has also provided further information on how the FOS intends to handle SME complaints by creating a ring-fenced specialist unit, with a dedicated team of 20 SME investigators with specialist knowledge and skills.

The Walker Review recommended:

  • a new dedicated SME division should be created under the governance of the FOS and within its legal framework. It should handle all eligible disputes, including from small business and micro-enterprises, bolstered by the appointment of new specialist senior managers;
  • in order to support the new SME division of the FOS, an expert advisory panel should be set up to provide high-level guidance and expertise on technical banking and legal issues arising in complex banking disputes. This mirrors the existing FOS provision for consumer complaints. The new panel would provide data and feedback to the FCA, and would be chaired by a retired judge, with the support of leading industry professionals; and
  • real-time data monitoring and feedback to the FCA and appropriate government departments should be at the core of the new SME division to enable potential problem areas to be identified at an early stage.

Voluntary ombudsman scheme and Dispute Resolution Service (DRS)

The Walker Review also recommended the introduction of a voluntary ombudsman scheme to support larger businesses (with turnovers between £6.5 million and £10 million) that are not FOS "eligible complainants" ideally under the existing FOS scheme, as well as a separate voluntary scheme to consider any legacy SME disputes that arose with banks following the financial crisis, which have not been eligible for other forms of dispute resolution. He proposed that once such a scheme has bedded down, say in two years (and assuming its successful operation), the size of business within its scope be reviewed and the limit of award raised to £600,000.

Finally, and separately to the ombudsman proposals, the Walker Review proposed that senior representatives of the major banks should support a formal process seeking to achieve reconciliation and closure. They should meet and listen to a representative sample of affected SMEs to acknowledge their losses and experiences and commit to a new system of dispute resolution to ensure past issues do not infect future relationships. This includes establishing a monitoring council of stakeholders, including SME representatives, to work in collaboration, to ensure processes are optimal and effective, to deal with prevailing issues and to act as an early warning mechanism.

Following this review, in his 2018 Budget, Chancellor Philip Hammond said the government expected the banking industry to set out its response to the Walker Review by the end of November. Consequently, on 30 November 2018, UK Finance published the industry's response largely adopting Simon Walker's recommendations. The seven initial participating banks have agreed to:

  • support the FCA's proposed extension of the FOS for SMEs in April 2019. They recommend that the employee test be removed so that SMEs are only required to meet the balance sheet and turnover test, believing it will address challenges by small businesses that rely on seasonal or temporary workers and remove most complex holding structures. They also support the recommendations of the Walker Review regarding the FOS;
  • establish an interim voluntary dispute resolution process for businesses with a turnover between £6.5 million and £10 million and a balance sheet of £7.5 million, believing the natural home for this to be the FOS;
  • establish an independent process, referred to as the Dispute Resolution Service (DRS), for reviewing legacy complaints since 2008 not previously addressed by another review process; and
  • establish an independent and transparent SME advisory council to consider emerging trends and issues regarding access to finance, the treatment of SMEs by financial services providers and the appropriate support for SMEs. The council should be willing to hear personal testimony of individuals with complaints to ensure issues are heard, understood and acknowledged.

The further expansion proposed for larger SMEs will require the support of the FCA and government. UK Finance acknowledges that concerns have been raised about the FOS's capacity to take on a further expanded role and as a result the seven initial participating banks have offered to establish an interim voluntary ombudsman process with a target date of September 2019, whilst consideration is given to the FOS taking on the role. The banks have agreed to an award limit of £600,000 in line with Walker's recommendations. Similar to the current regime for smaller SMEs, the voluntary ombudsman (or FOS if it takes on this role) will be able to recommend greater awards, which the financial services firm can choose whether or not to follow, leaving the complainant with the option of accepting the maximum £600,000 award or pursuing legal action.

To be eligible to access the DRS for legacy complaints, a business must:

  • have registered a complaint with its provider between 1 January 2008 and 30 November 2018 (relating to an event during this period);
  • not have accepted an offer of settlement from its provider in relation to the complaint;
  • not have been subject to an independent review process; and
  • have been ineligible for the FOS at the time of the complaint but eligible under the expanded scope in April 2019.

Businesses that have already brought litigation in relation to the dispute underlying their complaint, or that have raised a complaint that was already time barred when it was made, will not be eligible for the DRS. Consideration will also be given to the eligibility of directors and shareholders to pursue complaints relating to insolvent/dissolved firms. As to the award limit, this will be £350,000, in line with the FOS's increased award limit which will take place in April 2019. Similar to the FOS, the DRS would be able to recommend greater awards which the financial services firm can choose whether or not to follow. It is proposed that the DRS operate under an independent board of directors with representatives from mainstream business, and the head of the DRS should be a former senior judge who will sit for a maximum of three years. The head will be supported by an appropriate panel of technical and legal experts and the DRS would make decisions on an equivalent fair and reasonable basis as applied by the FOS. Disputes not settled through the first stage of the DRS process will have the right to be reviewed by an expert appeals panel, with a final appeal decision made by the head of the DRS. The DRS will be able to consider consequential loss claims on the same basis as the FOS. The seven initial participating banks have agreed to support and fund the establishment of the DRS with a target date of September 2019 and will establish a steering group to commence work immediately.

UK Finance has stated that the effectiveness of the proposals made by the seven participating banks will be enhanced by the broadest possible participation, including from non-bank lenders and new providers in the marketplace that serve eligible SMEs.


In their aim to deliver stronger, fairer outcomes for SMEs, the leading banks have provided a firm commitment to give access to dispute resolution forums to those SMEs whose only option previously would have been to undertake expensive, lengthy litigation. It will result in 99.5% of SMEs being eligible for a free dispute resolution forum, which will consider their case on a "fair and reasonable" basis, rather than the strict legal basis of the courts. The DRS is designed to remedy customer discontent over the past 10 years and plug the gap for those SMEs who did not have access to a dispute resolution forum or other form of independent review process. It will put those complainants with legacy complaints on an equal footing to those SMEs eligible for the FOS, post April 2019.

There has been some criticism levelled at independent review schemes, for a perceived lack of independence given the banks' control over them. This should be taken into consideration when the DRS, or the interim voluntary ombudsman process, is established to avoid similar complaints.

Whilst the commitment to ensure SME disputes are dealt with appropriately is positive and the proposals will, no doubt, be welcomed by SMEs, expanding the FOS further before even the current expansion has been able to bed in and its success measured must be exercised with a degree of caution. Walker has admitted his recommendations are "ambitious", and has acknowledged that if the ombudsman system fails, all options, including a financial services tribunal, should be explored.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions