Major high street banks have backed proposals to give small and medium sized companies greater power over complaints following a serious of scandals.
Trade body UK Finance said on Friday that banks have agreed to extend the powers of the Financial Ombudsman Service, establishing an independent SME advisory council and conducting a review of unresolved complaint cases for the last decade.
It will apply to companies that have a turnover between £6.5 million and £10 million and a balance sheet up to £7.5 million.
Lenders also support providing access to alternative dispute resolution for SMEs outside the current remit of the Financial Ombudsman Service.
The proposals are in response to recommendations from a review by Simon Walker, the former head of the Institute of Directors, on alternative dispute resolutions.
UK Finance says the industry is aiming to implement the voluntary ombudsman arrangements by next September.
The proposals have been backed by Barclays, CYBG, Danske Bank, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Santander in order to restore trust in the banking sector following scandals that made headlines in recent years over the mistreatment of SME customers, that victims say left them out of pocket or bankrupt.
RBS’s now-defunct Global Restructuring Group was accused of pushing firms towards failure in the hope of picking up assets on the cheap, though the Financial Conduct Authority earlier this year said there was no evidence of this, or of dishonesty or lack of integrity.
UK Finance chief executive Stephen Jones said: “SMEs are essential to the success of our economy. It’s therefore vital that lessons are learned from incidents of poor treatment of SMEs by the banking industry and that future redress schemes are fit for purpose.”
He added that the measures are “significant steps in restoring trust between SMEs and the financial industry”.
This was echoed by Matthew Fell, chief UK policy director at the Confederation of British Industry, who said the “recommendations are steps in the right direction”.
“Whilst there remains much to be done, the banking industry’s response is building a platform for the future.”
Adam Marshall, director general of the British Chambers of Commerce, said it will be “important for banks to ensure their business customers are aware of these new routes to resolve disputes, which will strengthen the confidence of many SMEs”.
However, lobby group SME Alliance rejected the proposals for dispute resolution put forward by UK Finance.
Nikki Turner, director of SME Alliance, said: “While there are some encouraging elements to these proposals, any scheme backed by the banks, on behalf of the banks, cannot have the independence needed to resolve issues to the satisfaction of British businesses.
“Similarly, the idea of extending the remit of the Financial Ombudsman Service, which doesn’t have a good track record and is already stretched to the point of collapse, is doomed to failure.”
Ms Tuner added that the majority of SME Alliance’s members would be excluded from the Financial Ombudsman Service’s process as the amounts available to be awarded “go nowhere near the amount of compensation due.”