Financial regulator commits to investigate ‘harsh’ lending practices raised by the Federation of Small Businesses
The Financial Conduct Authority (FCA) has today confirmed it will investigate the issues in lending practices that were previously raised by the Federation of Small Businesses (FSB).
The investigation follows a super-complaint filed by the FSB in December, which said banks’ lending practices “excessively demand personal guarantees for business loans” and put a damper on business growth.
Sheldon Mills, executive director of Consumers and Competition at the FCA, said: “Small businesses are vital to the UK economy, and it is important that they can access lending to help them grow – so we welcome the FSB raising these issues.
“We will play our part to better understand whether lenders’ practices are causing unnecessary barriers to growth and, if necessary, act to remove any within our remit.”
Through a collection of data, review of policies, guidance and monitoring the complaints of the issue at hand, the investigation will share its findings with the “appropriate government departments.”
Mills said the FCA’s remit, which is set by Parliament, is “limited when it comes to small businesses”.
“If we identify issues outside our remit, we will make these public so that Parliament and policy makers can consider whether greater protection should be available to small businesses,” Mills added.
Martin McTague, FSB’s National Chair, said: ““The FCA’s response is just not good enough.”
“We would now urge FCA to broaden this exercise to gather as much evidence as they can on lending to limited companies by regulated lenders, which is where the real problem lies,” McTague added.
McTague said the FSB’s “anecdotal evidence” presents a “strong case” to expand the FCA’s remit.
“We will be keen to discuss this with the Treasury in due course – whoever is in power,” he added.
The super-complaint was part of what has been an ongoing battle to end “harsh” lending practices to small firms.
The FSB called on the FCA to review banking practices and consult with the Treasury to expand its regulatory perimeter to help more small businesses, particularly those where directors often provide personal guarantees.