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SME Finance Report issued by the Treasury Select Committee

An SME Finance Report has been issued by the Treasury Select Committee today evaluating what needs to be done in terms of addressing the deficiencies in the SME finance market.

MBM Commercial’s Cat MacLean appeared before the Treasury Select Committee in May as an expert witness, providing evidence on SME finance at the Financial Services Tribunal. This Tribunal questioned the behaviour of the banks, particularly around resolving disputes and whether there is a need for a financial tribunal system.

Cat MacLean heads up MBM’s Dispute Resolution Team, and has been litigating against large financial institutions since 2008. She is a Panel Member of The Independent Monitoring Panel of the Chartered Bankers Professional Standards Board, a member of the Lord President’s Consultative Committee on Commercial Actions in the Court of Session, is a member of the APPG on Fair Business Banking’s Professional Advisory Panel, and a Committee Member of the House of Commons Parliamentary Inquiry into Financial Disputes.

Small and medium-sized enterprises (SMEs) form a hugely important part of the UK economy, accounting for 99.9 per cent of all private sector businesses and 60 per cent of all private sector employment. The effective provision of finance to the UK’s SMEs is therefore crucial for boosting the country’s economic performance. Yet the dark clouds of past misconduct still hang heavy over the SME finance market, undoubtedly affecting SMEs’ trust in the financial institutions that serve them. Restoring that trust will enable the UK’s SME sector to act as an even greater growth engine for our economy.

Today the Treasury Committee have issued the SME Finance Report which, in part, scrutinises the events that contributed to the erosion of trust in lenders and follows the Committee’s specific investigations into events at RBS’s Global Restructuring Group (GRG). The report contains a number of recommendations that seek to address the deficiencies in the SME finance market that have been laid bare in recent years.

The conclusions of the report make many key recommendations, such as assisting SMEs in building awareness and understanding of the financing options available to them. It recognises the reluctance of SMEs to apply for finance by improving levels of awareness and understanding of financing options. Overall, the Committee formed the view that alongside improving the Financial Ombudsman Service, there remains a need for a financial tribunal system – something for which many have been lobbying. The Committee concluded that more

Small businesses, and larger SMEs, should be provided with access to the Financial Ombudsman Service; however The FOS must be appropriately resourced to handle larger SME disputes. Cat MacLean commented:

“The point I would like to make about the Financial Ombudsman Service is that it may work well for consumer issues where the issue is straightforward—where an individual has been charged for going over their overdraft limit and, as a matter of fact, they didn’t. However, the kinds of claims that my clients have made before they come to me or that we make on their behalf—it is a mixture—seem just to be beyond the capability of those who deal with them at FOS. There seems to be a real difficulty understanding any of the complexities. I just do not feel that FOS is fit for purpose for the kinds of disputes we are talking about.”

Endorsing these comments, the Committee recommended the establishment of a Financial Services Tribunal to handle these disputes, commenting that such a body would usefully complement the expansion to the FOS’s remit proposed by the FCA. This is a step towards ensuring that the UK’s small businesses will no longer be denied justice, as so many have been in the past. Cat comments:

“I … think that if a bank is fined, it does not really have an impact on the individuals within that bank who are carrying out the day-to-day banking work … The kind of threat that a tribunal system and the laying of evidence will have will really help to drive the cultural change that banks need.”

We must introduce a system for dispute resolution and redress that gives the UK’s SMEs the confidence to engage with financial services providers, safe in the knowledge that they are not vulnerable to exploitation and mistreatment.

For further conclusions and recommendations issued by The Treasury Committee, the report is available to read in full here: https://publications.parliament.uk/pa/cm201719/cmselect/cmtreasy/805/80503.htm#_idTextAnchor000

For more information regarding financial disputes and fair business banking, please contact Cat MacLean: cat.maclean@mbmcommercial.co.uk

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