Our Banking lawyers explore the closure of the Lending Standards Board, what it means for small and medium-sized enterprises (SMEs), and how businesses can prepare for the changes ahead.
What is the Lending Standards Board?
The Lending Standards Board (LSB) is a self-regulatory body for the banking and lending industry, which was established to protect consumers and small and medium-sized enterprises (SMEs) by setting and overseeing compliance with a series of Standards and Codes.
Since its establishment in 2009, the LSB has played a vital role in strengthening the regulatory landscape by bridging the gaps not fully covered by statutory regulation and setting standards that drive best practice.
Key contributions of the LSB to the UK Financial Sector
Since its inception, the LSB has contributed to major changes in the UK’s financial sector, among other things, by:
- Enhancing protection against Authorised Push Payment (APP) fraud through the introduction of the Contingent Reimbursement Model Code, which placed greater responsibility on banks to prevent APP fraud and reimburse customers who fall victim to APP scams.
- Increasing the turnover threshold of the scope of the Standards of Lending Practice for business customers from £6.5 million to £25 million, to cover a wider range of businesses.
- Overseeing the implementation of remedies from the Credit Card Market Study, which helped reduce interest and penalty charges for customers struggling to make loan repayments.
- Introducing stronger protections for SMEs using personal guarantees for business loans, including annual reminders for guarantors and guidance on seeking independent legal advice, noting, however, that the requirement to provide annual reminders only came into effect in September 2025.
What does the LSB’s closure mean for SMEs?
The Consumer Duty strengthened protections for personal customers but was not designed to cover SME lending, much of which sits outside the FCA’s regulatory scope.
Until now, the LSB’s Business Standards provided the only independent framework overseeing how unregulated lenders treat SME customers.
These protections will with the LSB’s closure come to an end as there will no longer be an independent body monitoring how banks and lenders deal with SMEs.
As a result, businesses could face greater uncertainty and risk, including inconsistent lending practices, increased exposure to unfair contract terms and greater vulnerability to late payment and contract breaches.
In order to navigate potential lending risks, SMEs should:
- Carefully review loan agreements, credit conditions and repayment terms;
- Consider exploring government backed schemes;
- Consult with financial and tax advisers to better understand their lending risks and rights; and
- Seek legal advice before entering into any new lending contracts.
Conclusion
The LSB will continue to operate until 31 October 2025, during which time it will continue to work with registered firms and provide guidance as needed.
Following the closure of the LSB, businesses will need to be more vigilant when reviewing lending agreements and managing financial risks.
By seeking professional advice and exploring available support schemes, SMEs can better safeguard their interests in this new landscape.
Contact Our Banking Lawyers
If your business could be affected by the closure of the Lending Standards Board, our Banking Lawyers can provide tailored advice on managing lending risks and reviewing financial agreements.
Contact us today to speak with one of our specialists.
0161 941 4000
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Palma Percze
Associate
Palma is an Associate in our Corporate Team. Palma has experience assisting with various corporate matters including M&As, disposals, reorganisations and drafting shareholders’ agreements and articles.
About Palma Percze