UK Finance Minister Philip Hammond said that a proposed rectification process to aid small businesses in disputes with banks is too easy on the financial institutions, according to a report from Reuters.
The service, which was proposed by UK Finance, an organization that represents banks, shouldn’t have a cap on compensation, currently at an amount of 350,000 pounds, Hammond said in a letter.
The amount is potentially eligible to businesses with complaints against banks, including what are known as "historic" complaints, which can date as far back as the financial crisis.
The service targets companies with capital between 6.5 million and 10 million pounds. Because of the high number, companies of that size aren’t eligible to take complaints to the country’s free Financial Ombudsman Service, which means the companies would be on the hook for legal fees and an expensive court case if they chose to go after the lender.
UK Finance is in the process of setting up a group to hash out the details of the proposed relief scheme, even as lawmakers are complaining the scheme is too easy on banks.
Kevin Hollinrake, co-chair of the All-Party Parliamentary Group for Fair Business Banking (APPG), said he wouldn’t sit on the group unless eligibility, governance and claims limits were addressed.
Hammond said he wants “balanced representation” from all parties involved. “It is vital that different perspectives are heard during this implementation stage, to ensure that the schemes are regarded as truly robust and independent,” he wrote in the Jan. 19 letter.
As a default, the banks should pay whatever was awarded in the scheme, Hammond said.
The APPG responded positively to Hammond’s comments: “We are particularly pleased that the Chancellor has set an expectation that the bank’s default position should be that there is no cap on the amount of compensation awarded.”