Richard Thompson, principal ombudsman and quality director, shares his thoughts on how Covid-19 has impacted small businesses and the type of complaints we're seeing, as well as how our service is playing its part in helping to resolve them. 

The Financial Ombudsman Service has always been able to help the smallest businesses, and last year, our service was opened up to handling complaints from more small and medium enterprises (SMEs).  

Since then, the financial landscape SMEs are operating in has changed dramatically because of Covid-19. And we’re beginning to see the impact of this in the complaints referred to us.

Sharing our insight

We recently published data about the complaints we saw in the first quarter of our financial year, and insight into those that are linked to Covid-19. Like the pattern we’re seeing in our complaints more generally, they’re becoming increasingly complex, and not just because of the pandemic.

We’ve received more and more complaints from SMEs linked to issues caused or affected by Covid-19, many of which are complaints about business interruption insurance.

The complexity of questions around this issue prompted the Financial Conduct Authority (FCA) to seek clarity with a legal test case. We’ve been working closely with the FCA, and we’re considering what the test case means for complaints we’ve received.

Other Covid-19-related complaints we’ve seen from SMEs are about loans issued by banks under the government’s Coronavirus Business Interruption Loans Scheme and Bounce Back Loans Scheme, mostly to do with either declined applications or customer service. We’ve also seen an increase in complaints about credit cards, current accounts, e-money and hire purchase, though this is in line with trends we began to see before the pandemic.

Providing a service for small businesses

When we designed our new service for the larger set of small businesses which were coming into our jurisdiction, we talked to some of them to ensure we were planning a service that would meet their needs.  

This research, which we carried out prior to the pandemic, showed us that making a financial complaint can have a huge impact on SMEs. Effects of doing so include: reducing cash flow; loss of income or profit; needing to source alternative funding at short notice; incurring fees and charges; use of time; and the impact on wellbeing.

And for the majority of those complaining, the CEO, managing director or owner would be the one pursuing the complaint.  

Before our jurisdiction was extended, we surveyed SMEs who had complained to a financial business about a product or service in the past five years. Nearly 40% of them said they were unhappy with the outcome, but didn’t take their case to court, mostly because they thought it wouldn’t be worth the time, hassle, or cost.

We're already playing our part

We were encouraged that 84% of SMEs said that they were likely to use our service if they were unhappy with the outcome of a complaint, and that they’d value a service that was accessible and provide them with a single, straightforward point of contact.

Now, SMEs are contending with far more challenging financial difficulties and uncertainty. Business Debtline says demand for their service is increasing, and more than half of small business owners contacting them cite Covid-19 as the main reason for their financial difficulty – with one in five saying they’ve had to cease trading.

In such difficult times for SMEs, we expect to see new questions of fairness arise.

One thing that is clear is the extension of our jurisdiction to cover complaints from SMEs couldn’t have come at a more important time. We’re already playing our part in helping to resolve financial complaints, sharing insight about what we see to help sort things out at an early stage where possible or giving small businesses a fair and impartial opinion without having to go to the courts.

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The Financial Ombudsman Service for small businesses

The Financial Ombudsman Service for small businesses can help small businesses with complaints about financial services and products. You can find out more on our Financial Ombudsman Service for small businesses website.