A redress scheme created to rebuild trust between small businesses and banks after a series of lending scandals has entered liquidation, having paid out more to its senior staff than it did to the businesses it was meant to help.
Liquidators were appointed to the Business Banking Resolution Service (BBRS) last week, bringing the scheme to an end amid mounting criticism that it had “delivered virtually nothing” for victims of banking misconduct. The closure comes despite long-running disputes over the scheme’s independence and effectiveness.
The BBRS was launched in 2021 in response to historic lending scandals that affected tens of thousands of small firms. It was designed to provide an alternative route to dispute resolution for companies considered too large for the Financial Ombudsman Service but too small to pursue costly legal action against banks.
At its launch, the scheme was billed by its chairman, Lewis Shand Smith, as a “trusted, transparent and fair dispute resolution service”. However, it quickly became mired in controversy over its narrow eligibility criteria, the small number of cases it handled, concerns about transparency, and the level of pay awarded to senior executives.
By the scheme’s own assessment, it covered just 1 per cent of the small and medium-sized enterprise (SME) banking market. Last year, it emerged that the BBRS had paid more to its highest-paid director than it had arranged in total financial redress for complainants.
In May, the service disclosed that only 47 claimants had received awards through its formal adjudication process since its inception, despite initial claims from the banking industry that more than 60,000 businesses could fall within scope.
Carrie James and Nick Parsk, of legal and financial firm Oury Clark, were appointed as liquidators as the BBRS entered members’ voluntary liquidation — a process used to wind up solvent companies.
Kevin Hollinrake, the Conservative Party chairman and MP, who was closely involved in early discussions around the scheme’s creation but later became a vocal critic, said its failure should serve as a warning.
“It promised justice for businesses with valid complaints but delivered virtually nothing,” he said. “Too many SMEs have been left without answers and without redress from a system that was supposed to support them.”
Hollinrake said SME groups had warned from the outset that the scheme was “fundamentally flawed”.
“A voluntary system designed and controlled by the very institutions it was meant to hold to account was never going to deliver the fairness businesses deserved,” he said, adding that the scheme’s closure should mark a “turning point” towards a mandatory and genuinely independent dispute resolution system.
UK Finance, the banking industry trade body, defended the scheme, saying the anticipated volume of cases had not materialised despite repeated awareness campaigns.
“The BBRS was set up on an expectation that there would be a large number of potential cases, which subsequently did not materialise,” it said. “Throughout its time in operation, the BBRS delivered according to the eligibility criteria agreed with all relevant parties, including the main SME groups.”
The liquidation comes against the backdrop of ongoing legal action. The appointed liquidators said they were aware of civil litigation brought by a user who claims the BBRS was wrong to dismiss their complaint.
In one high-profile case, the BBRS unsuccessfully appealed a court decision allowing Romek Kriwald, a small business owner, to amend his claim against the service. During the proceedings, lawyers for the BBRS argued that the organisation did not owe complainants duties of care, skill or good faith, claiming its primary legal obligations were to the banks that funded it.
In court, a barrister for the service said the participating banks, rather than users, were owed certain obligations because “it was the participating banks that paid for the scheme, it’s their money and their reputation at stake”.
Hollinrake, who previously likened the BBRS to a “nightclub bouncer hired by the banks”, said the episode highlighted the need for reform.
“We need a genuinely independent, mandatory dispute resolution system that puts SMEs first — not the banks,” he said.
Shand Smith has previously defended the service, saying it “helped hundreds of SMEs reach resolutions”, “helped to build trust across the sector” and that staff could be “proud of their important work”.
For many small business owners affected by past lending scandals, however, the closure of the BBRS is likely to feel less like closure — and more like another missed opportunity for meaningful redress.
