In a world where everything is available at our fingertips, customer expectations are changing and the financial services industry is under mounting pressure to become more customer-focussed.
Two changes which are currently set to take effect in 2020 reflect this customer-centric approach:
Business Banking Resolution Service
A pilot of a new dispute resolution service, similar to the Financial Ombudsman Service, has been launched by the Business Banking Resolution Service (the “BBRS”). A limited pilot of the BBRS was launched on 1 November 2019, in preparation for the full launch which is set to take place in early 2020.
The BBRS is a non-profit organisation made up of a number of business groups and financial institutions and its aim is to resolve disputes between eligible SMEs in the UK and participating banks (of which there are currently seven, including RBS group, HSBC, Barclays and Santander UK plc). The participating banks will fund the BBRS, although it will be independently operated, managed and governed.
The BBRS will work in a similar way to FOS in that eligible SMEs will need to complain to their bank first and then, if their complaint is not resolved, the BBRS will seek to achieve a “fair and reasonable” resolution at the earliest possible stage.
SMEs will be able to access the BBRS free of charge and will be eligible if they have a turnover of between £6.5 million and £10 million, and a balance sheet of up to £7.5 million. The BBRS is therefore aimed at those SMEs who may not be eligible to present their complaints to the Financial Ombudsman Service (“FOS”) (which only covers SMEs with an annual turnover of less than £6.5 million). Once the BBRS is fully launched, UK Finance estimates that 99% of SMEs will have access to either the FOS or the BBRS.
Seeking a resolution to a dispute through the Courts can be extremely costly and complex so if the BBRS helps more SMEs and financial services firms to reach a resolution outside the Courts, that is a certainly a positive thing. However, the BBRS’s detailed rules have not yet been published so it is not yet clear exactly how the service will operate and whether it will mirror the FOS by imposing a cap on the amount of compensation it can award (the limit of compensation under the FOS is £350,000). How many disputes will actually fall within the BBRS’s remit is therefore unlikely to be seen until the full launch in 2020.
The Financial Services Duty of Care Bill
Next year may also see the introduction of a new statutory duty of care in the financial services industry as, on 29 October 2019, Lord Sharkey introduced the Financial Services Duty of Care Bill (the “Bill”) into the House of Lords.
The Bill proposes amending the Financial Services and Markets Act 2000 so that the Financial Conduct Authority (“FCA”) may impose a duty of care on authorised persons who are carrying out regulated activities for consumers. This would mean that any authorised person carrying out regulated activities may be under an “obligation to exercise reasonable care and skill when providing a product or service” to consumers.
In circumstances where the FCA’s Business Principles already require financial services firms to conduct their business with “due skill, care and diligence” and to “take reasonable care to ensure the suitability of its advice and discretionary decisions for any customer”, it is not clear what gap this new statutory duty of care proposes to fill.
So why has the Bill been introduced?
There has been growing demand for change in the regulation of financial services firms to better protect consumers for some time. This demand led to the FCA publishing a Discussion Paper in July 2018 titled ‘A duty of care and potential alternative approaches’. However, whilst the majority of respondents to this Discussion Paper considered that the level of harm to consumers was high and changes were needed to better protect them, the majority did not think that there were sufficient grounds for making legislative changes. The respondents cited “legal complexity” and “cost, delay and stress of litigation for consumers” among their reasons for reaching this conclusion. As a result, the FCA said that it would consider amending its regulatory principles to “strengthen and clarify firms’ duties to consumers”.
It remains to be seen whether or not the Bill will be implemented, especially now that Parliament has been dissolved for the upcoming General Election. However, regardless of the outcome of the Bill, it seems likely that the FCA will, in the near future, implement changes which impose greater obligations on those in the financial services sector when providing advice to consumers.
Naomi Findlay and Stephanie Reeves are Dispute Resolution specialists at Irwin Mitchell LLP
Responding to the opening of the expressions of interest for the Business Banking Resolution Service (BBRS), Stephen Jones, Chief Executive of UK Finance, said: “Today marks an important milestone in the creation of a resolution service for businesses that is trusted, transparent and fair. Thanks to the positive engagement of all groups involved in its development, the BBRS will be a ground-breaking service with a scope, mandate and level of expertise beyond anything seen elsewhere in the world. “Once fully operational, 99 per cent of small businesses will have access to this independent service or the Financial Ombudsman Service and we estimate around 60,000 customers will be eligible for the historic part of the scheme should they wish to use it.”