given the pressure to recover cash, many experts believe banks may find it difficult to act reasonably by struggling borrowers. One of the main issues here is that in the United Kingdom, mistreated borrowers cannot claim protection by law since lending to businesses is not regulated in the country.
Nevertheless, there was a significant rise in COVID debt as businesses were trying to stay afloat amid the pandemic. This, combined with banks being under pressure to recover cash to avoid triggering government guarantees, have revived calls for the sector to be regulated.
Although certain businesses may appeal to the Financial Ombudsman Service, only the smallest businesses, with an annual turnover of less than £6.5m, could tap into this alternative. On the other hand, some borrowers may recourse to the Business Banking Resolution Service, which was launched in February, although it only involves seven high-street banks, while the body has also been criticised for its eligibility criteria.
According to experts, the problem with the regulation is that when push comes to shove, much of this procedures are not enforceable. Accordingly, the All-Party Parliamentary Group (APPG) on Fair Business Banking, which includes members from the House of Commons and the House of Lords, has called on the government to regulate the sector and introduce laws which would provide leverage to small and medium-sized business owners in a court or tribunal. The Organisation’s Conservative chair Kevin Hollinrake noted that given the large amount of debt obtain by businesses during the COVID crisis, “the conversation is important now”. He pointed out that while many of the businesses who might inevitably default on their loans will be treated well and fairly by their lenders, however, it won’t be the case every instance.
