LSB statement on Government Responses to the Treasury Committee’s Twenty-Fourth Report: SME Finance

The LSB welcomes the government’s response to the Treasury Committee’s report on the SME Finance inquiry which recognises the introduction of the Standards of Lending Practice for business customers as a positive change in the financial services industry in the years following the financial crisis. We believe that voluntary self-regulation, underpinned by a robust and proactive oversight framework is a viable alternative to statutory regulation and it is encouraging to see that the Standards have been recognised as setting good practice in an important and evolving area of lending. This progress has been made possible through our registered firms’ commitment to the Standards and the part they can play in setting high standards of conduct within the business lending space.

The government’s response also notes that industry standards and codes of conduct, such as the Standards, are taken into account by the Financial Ombudsman service when deciding what is fair and reasonable in their adjudications. We share government’s opinion that the FOS reforms – both expansion of FOS’s eligibility to include small businesses and the commitment of the industry to provide a voluntary ombudsman scheme for businesses with a turnover between £6.5m and £10m –  will create a strong dispute resolution mechanism for UK SMEs. We are pleased that the Standards of Lending Practice will have a role to play in this.

The Standards of Lending Practice for business customers have been effective since July 2017, supported by the LSB’s proactive oversight framework. The Standards product scope applies to loans, commercial mortgages, overdrafts, credit cards, charge cards and most recently, asset finance products. We are currently consulting with the industry to extend protection to businesses with a turnover of up to £25m.

Our registered firms include retail banks, smaller lenders, monoline credit card providers, debt purchase and debt collection firms. The LSB has 38 registered firms, 20 of which currently lend to small businesses, covering approximately 96% of the small business market.

We continue to engage with individual firms in a bid to encourage more of them to register, with a view to increasing market coverage and widening the reach of the protections of the Standards of Lending Practice, thus ensuring that all personal and small business customers receive a fair deal from their lender.

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