Government under fire over lending to SMEs
THE chairwoman of the Treasury Committee has criticised the UK Government for “burying its head in the sand” over protecting small businesses from being exploited and mistreated by banks and other lenders.
The House of Commons Treasury Committee in October called on the Government to create a financial services tribunal to provide redress for small and medium-sized enterprises (SMEs) from being unfairly treated by financial services firms.
In response to the committee’s report, the Government said it prefers an ombudsman-style approach rather than a tribunal as an ombudsman applying a “fair and reasonable test” on the circumstances of a case is “more likely to lead to better outcomes for SMEs than a tribunal’s more legalistic approach”.
The Government has therefore backed the Financial Conduct Authority’s planned expansion of the Financial Ombudsman Service (FOS) to include small businesses and microenterprises, as well as the banking industry’s commitment to create a voluntary ombudsman scheme to address complaints from SMEs which have an annual turnover of up to £10 million.
But Nicky Morgan MP, chairwoman of the Treasury Committee, said there is cross-party support to regulate commercial lending and that she is “disappointed” that the Government has refused to follow the committee’s recommendations.