LONDON (Reuters) – More small companies in Britain will be entitled to free arbitration services in any dispute with banks, enabling them to avoid the costly process of going to court.
Announcing the plans on Tuesday, the Financial Conduct Authority (FCA) also proposed more than doubling the amount of potential compensation for small companies in such disputes to 350,000 pounds ($462,000), from 150,000 pounds.
From next April firms with fewer than 50 employees and annual turnover of less than 6.5 million pounds, or an annual balance sheet below 5 million pounds, will be able to use the Financial Ombudsman Service (FOS), the FCA said.
The FOS deals with complaints that have not been resolved between regulated financial firms and customers. Without access to the FOS, a business would have to take a bank to court.
Currently only individuals and very small firms with fewer than 10 staff and a balance sheet of up to two million pounds can use the FOS, which has powers to arbitrate on a complaint and order compensation.
The regulator has come under pressure from lawmakers to widen access for smaller firms to the FOS after customer mistreatment scandals at Royal Bank of Scotland <RBS.L> and Lloyds <LLOY.L>, both of which were bailed out by taxpayers in the financial crisis.
The FCA published the new rules following a public consultation.
British lawmakers, however, have expressed doubts about the FOS’s ability to cope with a wider remit and have proposed a bank-funded tribunal service, a step that would need legislation.
($1 = 0.7577 pounds)
(Reporting By Huw Jones and Emma Rumney, editing by Maiya Keidan and Susan Fenton)