HM Treasury have notified the newly formed Business Banking Resolution Service (BBRS) to brace for complaints from SMEs regarding government backed loans sold under the coronavirus business interruption loan scheme (CBILS).
Such complaints could include for example the fact that a company has not been given a loan and they think they should have, or that the conditions changed, the regulations changed and they wanted to change the loan into a different one.
On 1 November 2019 the BBRS launched the dispute resolution pilot for selected complainants in preparation for the full implementation of the dispute resolution service in 2020. The BBRS have released its eligibility criteria (with eligible complaints being businesses that have a turnover of between £6.5 million and £10 million), with the intention being that the BBRS will accept SMEs that would otherwise not be eligible to present their complaints to the Financial Ombudsman Service (the “FOS”).
What is the Business Banking Resolution Service?
The Business Banking Resolution Service is an alternative redress service for businesses that have been victim to banking misconduct. Seven leading UK banks have voluntarily accepted the proposals outlined in the UK Finance- commissioned Walker Review, creating an alternative to legal action, the Financial Ombudsman Service and bank-run compensation schemes for SMEs mis-sold complex derivative products.
What is the Coronavirus Business Interruption Loan Scheme (CBILS)?
The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to UK SMEs that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.
The scheme is a part of a wider package of government support for UK businesses and employees.
More information can be found on the Government’s Business Support website.
Which banks are participating in the BBRS?
The BBRS accepts complaints made against the following banks:
- Barclays Bank;
- Clydesdale Bank (including Yorkshire Bank and Virgin Money);
- Danske Bank;
- Lloyds Banking Group (including Lloyds Bank and Bank of Scotland);
- RBS Group (including Royal Bank of Scotland, NatWest and Ulster Bank Northern Ireland); and
- Santander UK plc.
Borrowers who took out Covid loans with one of the other 90-plus accredited CBILS lenders will not have access to the BBRS.
What is the BBRS live pilot?
The live pilot has been launched prior to the roll out of the full service which is expected to be available in autumn 2020. It is anticipated that a limited number of complaints will be considered for the live pilot.
Which businesses are eligible to use the BBRS?
An SME must first have submitted a complaint to its bank in line with the bank’s own internal complaints handling procedure.
Complaints with only be accepted from businesses registered in England, Wales, Scotland or Northern Ireland.
In terms of eligibility, the criteria for a company must meet the following turnover and assets criteria in order to be eligible for the BBRS:
For the period from 1 April 2019 onwards:
- Turnover up to £10m per annum; and
- Total assets up to £7.5m.
For the period from 1 December 2001 to 31 March 2019:
- Maximum turnover up to £6.5m per annum; and
- Total assets up to £5m.
How does eligibility for the BBRS differ from the FOS?
The FOS only accepts complaints from a “micro-enterprise” or a “small business”. The Financial Ombudsman Service is of limited utility to SMEs attempting to settle disputes with banks because it is only able to deal with cases for losses of up to £150,000 and does not either punish wrongdoer banks or monitor banks to ensure that they comply with the applicable rules and regulations. Further, a large number of SMEs do not qualify as micro-enterprises and the banks are adept at raising technical arguments on jurisdiction to prevent the FOS from acting.
By way of example, we have seen a case where the FOS accepted a complaint for an SME assessed as a micro-enterprise and then reached a provisional decision against Lloyds Bank PLC, awarding over £100,000 for the mis-selling of a fixed rate loan. However, Lloyds then argued (belatedly) that the FOS should not adjudicate the dispute as the complainant was allegedly not a micro-enterprise and therefore not eligible to bring a complaint. Remarkably, the FOS seems set to accept this as a basis not to reach a final decision, demonstrating the skill and persistence with which banks and their legal teams seek to elude any regulatory accountability for their actions.
Will the Business Banking Resolution Service (BBRS) work?
SMEs are too often drawn into complex disputes with banks and other financial institutions, which are beyond the remit of the FOS to address due to FOS’s maximum threshold of £150,000 (now £350,000 from 1 April 2019 against regulated firms). Furthermore, the court system can be costly and risky for SMEs (who do not have the financial and legal sophistication of the banks). The FCA is not equipped to be an arbiter of disputes, and so regulatory review schemes are fatally undermined by the FCA’s reliance on the wrongdoer banks to conduct such review schemes into their own alleged wrongdoing.
It is clear that the current avenues for redress are not working for SMEs; if justice is to be delivered and maintained in the future, a new avenue for redress needs to be created.
However, it remains to be seen whether another redress apparatus with voluntary compliance by major banks (the BDRS) will be able to provide a platform for justice for SME customers and instill confidence in the banking sector by operating as a safeguard against past and future financial misconduct.
In particular, safeguards need to be put in place to ensure that banks do not simply repeat their previous tactics (used in litigation and in regulatory review schemes) of withholding potentially damaging information.
A big step towards creating a functional BBRS that can exercise appropriate control over the financial services industry and fill the lacuna that currently exists in practice for SMEs is for the BBRS to have the power to control the disclosure process and to sanction non-compliance publicly.
LEXLAW Banking Litigation & Dispute Resolution
It is an absolute must that victims of RBS,Clydesdale Bank, Yorkshire Bank or other banks protect their legal rights. This is the only sensible course of action when a business is facing a high value dispute with a major bank, such as the Lloyds or RBS. Otherwise, if there is no redress scheme, or if the bank refuses to offer reasonable redress, customers may well find they are time-barred from commencing legal action and their high value claim is now worthless. Legal rights can be protected by taking urgent legal advice and by instructing specialist financial services litigation solicitors to issue a protective claim form or by instructing us to prepare and agree a carefully written standstill agreement.
Our Financial Services Litigation team of Solicitors and Barristers in London are highly experienced in banking litigation and specialise in representing SMEs in banking disputes. Our high profile and high value cases regularly appear in the national and international media. Our banking litigators advise on the protection of borrower legal rights in the face of predatory bank practices. We have successfully managed and settled court litigation against all major UK banks and have widespread experience in managing claims through redress schemes (which are similar to the Business Banking Resolution Service (BBRS)). Call us on 02071830529 or complete our online contact form.
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LIMITATION ACT 1980 – WARNING
The Limitation Act 1980 sets out strict statutory deadlines within which you must bring litigation claims. Your legal rights will become irreversibly time-barred if you fail to take legal action (or defend a claim on time). Therefore, you should seek specific legal advice about your legal dispute at the very first opportunity so that you understand the time you have left. Failure to take advice or delay in taking action can be fatal to your prospects of success.