Asset lenders prepare to step up ‘self-regulation’

The Asset Based Finance Association (ABFA) rejected allegations that some invoice finance firms are abusing their preferred creditor status to profit from administrations. However, it said it is “aware of a very small number of people that, following the failure of their businesses, believe the finance provider could have done more to rescue the business”, reports The Telegraph.

It added that it accepted that “people have felt that they have nowhere to take their complaint” since the industry, which advances around £16bn to small and medium-sized companies, is unregulated.

Kate Sharp, chief executive of ABFA, said: “ABFA has been looking into taking a greater role in the areas of self-regulation and conduct which will help solve this problem.” A new code of conduct and complaints procedure will be in place by January, she added.

She said ABFA, which is made up of banks and independent providers, had been considering the move for “the past year” so it is not a response to the allegations, which were made during a Daily Telegraph investigation of the industry.

Industry insiders, brokers and business owners told this newspaper that lenders are exploiting contractual fees and their preferred creditor status to make money from struggling businesses, while there were also concerns over collusion between the insolvency profession and lenders over company failures.

Frances Coulson, former president of insolvency trade body R3, has warned that there is “enormous amount of abuse going on at the murkier end of the [invoice finance] market”.
Ms Sharp said: “The allegations appear to relate to a few unidentified cases. They are being used unfairly to paint an inaccurate and grossly misleading picture of the industry. We receive only a tiny number of complaints from users about either the industry or its members. Against this are consistently high customer satisfaction figures with many businesses endorsing [invoice finance].”

She added: “We do not believe that [members] would ever abuse their creditor status to force firms into administration. The most productive relationships for an invoice finance provider are those that last for many years.”

The Business Department and the Treasury are currently “looking into” the allegations. Ms Sharp said ABFA would be happy to “explore the issues raised”.

Brian Moore, who is campaigning for regulation of the industry, has been invited to share his concerns with the Treasury.

He said: “It is not surprising that the industry mouthpiece has received so few complaints from people dissatisfied with the members they speak on behalf of.

“Most business owners have never heard of ABFA, few people would easily find their code of conduct on their website as they do not know it even exists and some of those who have complained about an asset based finance association [ABFA] member have discovered that, even when no evidence has been provided, the ABFA find in favour of their member.”