Bridging The Gap: A Level Playing Field For Financial Disputes

Joint Inquiry

The All Party Parliamentary Groups on Fair Business Banking and Alternative Dispute Resolution are launching an Inquiry into suitable mechanisms that can be employed to provide a long-term dispute resolution platform for businesses that find themselves in a financial dispute. This follows the Backbench Business Debate in the House of Commons on 15 December 2016 on the need to create a level playing field for financial disputes between banks and businesses.

With the advent of another compensation scheme to be set up by RBS, the spotlight is once again on how we can resolve major complaints between businesses and their lender in a timely manner. CEO of the FCA, Andrew Bailey, stated in evidence to the Treasury Select Committee in July 2016 that the IRHP mis-selling compensation scheme has not been entirely successful. He also stated that he did not believe that the FCA was the correct vehicle for such schemes. One-off schemes like this cannot act as a sticking-plaster for recurring issues. There is a need a systematic, holistic approach to protection, dispute resolution and redress.

The purpose of the Inquiry will be to analyse the current landscape and present a suite of recommendations that can be adopted on a voluntary and statutory level to address the current gap in the system. It will focus on what forms of dispute resolution may be suited to bridge such a gap, with many such disputes falling out of scope of the Financial Ombudsman Service yet not being large enough to make court an economically viable option.

Alternative dispute resolution (ADR) mechanisms are a range of procedures that serve to resolve disputes generally involving the intercessions and assistance of a neutral third party to promote a binding settlement or decision. ADR is recognised as a confidential, cost-effective and faster alternative to litigation. In being, on the whole, less adversarial than court it helps businesses preserve commercial relationships despite contractual difficulties. Its authority is derived from private agreement, with the courts having an important enforcement role.

The Committee will also examine the roles the Small Business Commissioner, the Financial Ombudsman, and a potential Financial Tribunal can play in the system of dispute resolution. The Committee has a committed contact at the FCA, and will consult with them to ensure that any recommendations put forward dovetail with the current regulatory framework.

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