Taking a complaint to the Financial Ombudsman as a small business

A complaint to the Financial Ombudsman only gets a hearing if the person bringing it falls into one of the categories the rules set out. The relevant rule is DISP 2.7.3R, in the Financial Conduct Authority's Dispute Resolution sourcebook, and it names four kinds of eligible complainant: a consumer, a micro-enterprise, a small business, and a guarantor.

Consumer

A consumer, in this rule, is a person acting outside their trade or profession. If you borrowed in your own name for something unconnected to the business, that borrowing falls here. Most directors reading this page will not be complaining as consumers, because the borrowing in question was for the business.

Micro-enterprise

A micro-enterprise is a business with fewer than ten staff and a turnover or balance sheet total under a threshold set by the same FCA rules. If your business sits in that range, it can bring a complaint in its own name, as the business.

Small business

A small business, for this purpose, is larger than a micro-enterprise but still below the FCA's own size limits on turnover, which is a separate test from the micro-enterprise one and worth checking against your actual figures. A business above those limits is not an eligible complainant under this rule, whatever the merits of the complaint itself.

Guarantor

A guarantor is someone who signed a personal guarantee for the business's borrowing. That status makes you eligible to complain in your own right, separately from any complaint the business itself might bring, because the guarantee is a separate obligation you took on personally.

Working out which of these four you are is the first thing to settle, because it decides whether the Financial Ombudsman can open a case at all. The finance type navigator can help you see which family of borrowing you're dealing with, and the finance instruments reference sets out what each one actually commits you to.

The Ombudsman does not take every complaint about money. Before it will look at yours, two things have to be true at once: the complaint has to be about a firm regulated for the activity you're complaining about, and you have to have already put that complaint to the firm itself.

The firm has to be regulated for what you're complaining about

Not every business that lends money is regulated for that lending. A bank, a regulated lender or a broker holding authorisation for the credit activity in question falls within the Ombudsman's reach. Some finance sits outside consumer-credit rules altogether, and whether yours does depends on what the money was for and how your business is set up. The finance type navigator sets out which protections apply to a given purpose and legal form, which is the first thing to check before you complain.

The firm's own process comes first

You cannot go to the Ombudsman straight away, however strongly you feel about what's happened. The firm gets the first chance to put it right. You complain to the firm directly, in writing is safest, and the firm investigates and responds. It then has a set period, eight weeks, to send you what's called its final response, or to explain why it hasn't been able to. Only once that period has passed, or once the firm has sent its final response, does the complaint become one the Ombudsman can take on.

What this means while you wait

If eight weeks pass and you've heard nothing, you don't need to keep chasing the firm. You can take the complaint to the Ombudsman at that point. If the firm responds sooner and rejects the complaint, you can go to the Ombudsman then. Either way, the record of what you told the firm and when is worth keeping, because the Ombudsman will ask for it.

The Financial Ombudsman Service looks at individual complaints and decides whether a firm has treated a particular customer fairly. It does not have the power to change the rules a lender has to follow more widely, and a decision in your favour does not force that lender, or any other, to alter how it deals with customers generally. If you want a rule changed, the Ombudsman is not the route.

It cannot fine the firm

Where a complaint succeeds, the Ombudsman can direct the firm to put things right for you: paying compensation, correcting an error, or reversing an action. It has no power to fine a firm for what happened, and that is not part of any decision you receive. Fining and supervising firms sits with the regulator.

A decision binds the firm

Once the Ombudsman reaches a final decision, the firm is bound by it if you accept it. You are not. If the decision goes against you, or you think it does not go far enough, accepting it is your choice, and nothing stops you turning it down and taking the matter to court instead. That is worth knowing before you complain, because it means asking the Ombudsman to look at your case does not close off the alternative if the outcome disappoints you.