• Lewis Shand Smith, former Chief Ombudsman and Chief Executive of Ombudsman Services, has been appointed as the independent Chair of the Dispute Resolution Service Implementation Steering Group.
  • The Steering Group is being established to deliver the Dispute Resolution Scheme (DRS) – an industry funded interim voluntary ombudsman scheme which will offer support to larger SMEs that are not eligible to complain to the FOS or captured under the extended scope of the FOS which will come in to effect in April 2019. The Group will also create a voluntary business ombudsman scheme for eligible historic cases.

Lewis Shand Smith the former Chief Ombudsman and Chief Executive of Ombudsman Services, has today been appointed as independent Chair of the Dispute Resolution Service Implementation Steering Group. The new Steering Group, which is supported by the UK’s seven leading lenders to small and medium size enterprises (SMEs), will take forward the banking and finance industry’s response to the Simon Walker Review (the “Review”) of alternative dispute resolution (ADR) for SMEs to establish and deliver the voluntary arrangements agreed by the seven initiation participating banks:

  • Provide access to an appropriate ombudsman scheme for SMEs with turnover of between £6.5 million and £10 million and a balance sheet up to £7.5 million. The industry commits to supporting the establishment of a suitable ombudsman scheme for larger SMEs that meet the eligibility criteria beyond the extended mandatory jurisdiction of the Financial Ombudsman Scheme.
  • Voluntary business ombudsman scheme for eligible historic cases. In support of addressing the concerns set out in the Review regarding the historic treatment of customers, the largest UK banking providers have agreed to support the establishment of a voluntary and independent dispute resolution service (DRS) for reviewing unresolved historic complaints brought forward by SMEs. This will cover disputes involving SMEs that have arisen since 2008 and have not already been addressed by an independent review process.

The DRS Implementation Steering Group will undertake further work to develop the scope, operation and funding of the scheme for eligible historic cases; and to develop and implement the forward-looking ombudsman scheme refining the application, delivery and funding of the system for SMEs with turnover of between £6.5 million and £10 million and a balance sheet up to £7.5 million.

As its independent Chair, Lewis Shand Smith will lead the Steering Group to oversee the implementation of these commitments. The Group will include key stakeholders including business representative groups and with government and regulators present as observers to develop the necessary proposals as quickly as possible with the aim of delivering the DRS by September 2019.

The proposed composition and terms of reference for the Steering Group are set out in the UK Finance response to the Walker Review subject to the chair’s proposals. UK Finance will provide secretariat support for the establishment of the group until an independent secretariat has been appointed.

Mr Shand Smith has been appointed by an independent selection panel comprised of SME representatives such as the Federation of Small Businesses.

Lewis Shand Smith said: “Access to appropriate mechanisms for dispute resolution is vital in helping to restore trust between the banking sector and SMEs. The new arrangements being set up by the implementation Steering Group will widen access to review and redress for SMEs and needs to have the right level of independence, transparency and expertise. I look forward to working with my fellow Steering Group members as well as the seven banking groups to achieve this.”

Stephen Pegge, Managing Director, Commercial Finance said: “Lewis Shand Smith’s extensive experience makes him the ideal candidate to undertake this important role. The banking groups involved are committed to working collaboratively with him and the wider stakeholders on the DRS Steering Group in delivering a leading dispute solution for small and medium sized businesses.”

ENDS

Notes to Editor

UK Finance acts to enhance competitiveness, support customers and facilitate innovation across the banking and finance industry. It offers research, policy expertise and advocacy as well as operational and project activity to enhance members’ own services where collective activity across the industry is appropriate.

Lewis Shand Smith Biography

Lewis Shand Smith was Chief Executive and Chief Ombudsman of Ombudsman Services, the Energy and Telecommunications ombudsman, from 2009 until 2018. He is President of NEON, the network of European energy ombudsman schemes and a past Chair of the Ombudsman Association.

He was Deputy Ombudsman and a member of the Executive Board at the Scottish Public Services Ombudsman (SPSO) from 2002 – 2007.

He is a priest in the Scottish Episcopal church and has served several congregations in Motherwell, Shetland and Dumfries. He was a Canon of St Andrew’s Cathedral in Aberdeen. From 1990 to 1999 Lewis was a member of Shetland Islands Council, becoming Convener/Leader in 1994. He has served as a non-executive director or trustee with a number of companies and charities. He is a former Vice President of the Convention of Scottish Local Authorities, was a member of the Executive of the Scottish Constitutional Convention and represented the UK on the European Committee of the Regions.

Alternative Dispute Resolution

Earlier this year UK Finance, the trade body representing the UK’s finance industry, commissioned Simon Walker to undertake an independent review provided in to the scale and complexity of banking complaints from SMEs with particular focus on disputes between financial services providers (excluding insurance products) and small business customers that remain unresolved through the normal customer complaint procedure and may be unsuitable for court processes.

Backed by the seven initial participating banks UK Finance’s response to the Walker Review are:

  • Support for the extension of the scope and capability of the FOS to enable a significantly strengthened service for businesses with turnover of up to £6.5 million and balance sheets up to £5 million, covering 99.5 per cent of all existing SMEs. The industry supports the implementation of the Financial Conduct Authority’s (FCA) proposed expanded scope and mandate from April 2019. Under this expansion, 99.5 per cent of all SMEs would be able to access an enhanced, business focused independent complaints review and redress mechanism via the FOS.
  • Provide access to an appropriate ombudsman scheme for SMEs with turnover of between £6.5 million and £10 million and a balance sheet up to £7.5 million. The industry commits to supporting the establishment of a suitable ombudsman scheme for larger SMEs that meet the eligibility criteria. These firms will be able to have their complaints reviewed and redressed through the creation of a specialist ombudsman service with the expertise and powers to address larger and more complex cases for eligible SMEs, funded by the banking and finance industry. These criteria are in line with the findings that the Review identified based on Legal Services Board surveys about the threshold above which court processes ought to be accessible to businesses.

The industry believes that the natural home for the ADR mechanism for this cohort of businesses is within the framework of the FOS. However, the industry has agreed to support and fund an interim voluntary ombudsman with an aim to deliver the arrangement by September 2019 and will work with all stakeholders with input from government and regulators to develop the necessary proposals as quickly as possible.

This new scheme will recommend appropriate awards for redress, which will be binding on banks up to a new higher level of £600,000 (meaning the bank cannot appeal any award up to this threshold). As with the current FOS binding award levels both parties can appeal over this threshold and the SME can still go to court if it wants to pursue an award above the threshold.

  • Voluntary business ombudsman scheme for eligible historic cases. In support of addressing the concerns set out in the Review regarding the historic treatment of customers, the largest UK banking providers have agreed to support the establishment of a voluntary and independent dispute resolution service (DRS) for reviewing unresolved historic complaints brought forward by SMEs. This will cover disputes involving SMEs that have arisen since 2008 and have not already been addressed by an independent review process.
Lewis Shand Smith appointed as chair of the dispute resolution service (DRS) implementation steering group