London: More companies should be allowed to complain to the Financial Ombudsman Service to seek redress if they feel they have been treated badly by their banks, Britain's markets watchdog said on Monday.
The Financial Conduct Authority said only very small firms with fewer than 10 staff and balance sheet of up to two million pounds ($2.8 million) currently have access to the FOS, which can arbitrate on a complaint and order compensation.
The FCA came under pressure from lawmakers to extend access to the FOS following scandals at Royal Bank of Scotland and Lloyds Banking Group, both of which got state bailouts during the financial crisis.
Without access to the free FOS resolution service, a business would have to take a bank to court, a costly and time-consuming process.
"Our evidence suggests some small businesses currently find it hard to achieve a fair outcome in disputes with financial services firms because court action is not a realistic option for them," FCA chief executive Andrew Bailey said in a statement.
The FCA proposals extend this access to all businesses with fewer than 50 employees, annual turnover of under 6.5 million pounds ($9 million) and an annual balance sheet total of under 5 million pounds.
"In total, we estimate around 160,000 more businesses will have access to the Ombudsman as a result of our proposals," the FCA said. Charities and trusts coming within the new thresholds would also be eligible.
The FCA set out its proposals in a 64-page consultation paper. Final rules will be published in the summer and come into force on December 1.
RBS and Lloyds set up voluntary compensation schemes after lending and business turnaround scandals involving small companies, but the two schemes have been criticised by firms for being unfair.
"As long as a complainant is eligible, the ombudsman can consider complaints about any regulated activity; it can also consider complaints about some unregulated activities, such as, lending to companies or the activities of business turnaround units," the FCA said.
The watchdog said its proposals will provide access to the FOS for more than 80 per cent of the approximately 200,000 small- and medium-sized enterprises who are not currently eligible.
The FOS can order a bank to pay redress of up to 150,000 pounds, and raising this limit would require legislation.