By Antony Townsend, Chair of the SME Liaison Panel

Introduction

As chair of the panel I’m writing this blog as the SME Liaison Panel’s response to the report of the Post Implementation Review Part 2 (PIR2), published by BBRS on Monday 9th January 2023.

We welcome the fact that the report draws attention to the problems which arose when the Scheme was established, the poor experiences that complainants had, the false expectations which were created, and the recommendation that steps should be taken to simplify the complaints process. The Panel will participate in discussions on those matters.

The Panel believes that all stakeholders should learn the lessons from the experience since BBRS was established, and consider how complaints should be tackled in the future – whether through a reformed BBRS or another mechanism.

BBRS has not met stakeholder expectations

However, the Panel’s principal concern is that the report should not be interpreted as implying that the Scheme, as currently constituted, has met the expectations which stakeholders had at the Scheme’s establishment. It has not.

In the Panel’s view, in practice the Scheme’s operation has fallen significantly short of those expectations, and changes are now required to the Scheme or whatever might be put in its place at the end of its period of operation.

Focus on broad objectives of the scheme not the narrow rules that govern it

At the risk of over-simplification, the report’s conclusion is that, while there is scope for some improvement, BBRS is doing what it is required to do under its constitution and Scheme Rules. The report acknowledges that the original expectation was that that more cases would be resolved by the Scheme, but concludes that this was simply a forecasting error.

The suggestion seems to be that with some process improvements and greater transparency from the banks about cases settled outside the formal process (both of which we welcome) the problems will be solved. We do not agree.

It is essential that, in the debate about lessons learned, we move away from a narrow legalistic approach based upon the Scheme Rules, and look at the broader objectives at the time the Scheme was established.

Flexibility  – to ensure no firms fall through the gaps

SME representatives who were involved in the discussions which led to the establishment of the BBRS are clear that, in addition to the formulation of the rules (which resulted from an inevitable series of compromises), there was a clear understanding that the Scheme would be operated flexibly, including the use of the concessionary route; that care would be taken to avoid cases falling ‘between the gaps’; and that the position would be reviewed in the light of experience, through the mechanism of a Post Implementation Review.

Even if one were to accept all the findings of PIR2, the fact is that it does not answer some key questions. In the paper which we submitted to UK Finance, we drew attention to two key statements: the then Chancellor’s statement in 2019 that:

If it transpires that the scheme is not bringing resolution to a meaningful number of complaints, and as such is not going to achieve its objective of bringing closure to past complaints, then I would expect there to be further discussions around the scope of and eligibility for the backward-looking scheme;

In addition, the BBRS’s then Chief Executive in 2021 said that:  I want to be clear that, consistent with our purpose, we will do our best to seek resolution wherever possible and we will be pro-active and creative in how we do so. Also, while our capacity to adjudicate is an important one, many cases will be more suitable for one of the range of other dispute resolution techniques at our disposal. We will always have a mindset of ‘how might this be resolved?’ first and foremost. There will be no ‘computer says no’ approach and we will explore every avenue available to us for securing a fair and reasonable outcome.

Small numbers of cases and lack of use of the concessionary provisions

The statistics strongly suggest that neither of these objectives has been met. One only has to look at the tiny number of historic cases which have gone all the way through the Scheme, and the fact that very few cases have been sent down the concessionary route (and most of those have been rejected by the banks). PIR2 does not address this.

Taking these issues forward with the banks

The Panel has started discussions with UK Finance with suggestions for changes to the eligibility criteria (which should apply to both historical and contemporary cases). We are taking legal advice on these, and will be seeking further discussions with UK Finance shortly. We hope that UK Finance will engage constructively with this process, and be open to suggestions for change. We also hope that – as suggested in PIR2 – BBRS will become more willing to undertake a facilitative role.

A bold future model for complaints handling

Overall, the Panel remains willing to engage with the banks and BBRS to find a way forward, but it is essential that there is a proper debate about the ways in which BBRS has not fulfilled all of the broad objectives which led to establishment, rather than simply a narrow and legalistic debate about the details of the Rules.

We need to be bold in considering what the future model of complaints handling for SMEs should be, how appropriate flexibility should be increased, and how a reformed BBRS (or a successor mechanism) should be established.