The company blamed rogue staff members, who are understood to have passed on some of the proceeds of putting clients into administration to brokers who gave them “leads” on companies they deemed likely to go to the wall.
Bibby refused to reveal how many times the practice took place but insisted it was isolated to “rare exceptions” and that “strong action was taken by our chief executive to ensure this wasn’t repeated”. It is understood that the staff concerned kept their jobs, reports The Telegraph.
An industry expert said such an arrangement would be seen as an “inducement” to provide finance providers with “basket cases” and inappropriate deals so they profit from subsequent administrations.
Asset-based lenders advance around £16bn to small businesses, typically against their invoices by taking security over their debtor books.
A Daily Telegraph investigation of the unregulated industry has highlighted allegations of lenders charging excessive and opaque fees and “profiting” from company failures through so-called “termination fees” that lenders charge when they appoint administrators.
Ian Johnston, an independent broker, said he was “astounded” that such an “unethical” deal could have existed.
He said sharing termination fees with brokers would lead “the more unscrupulous broker to place enquiries from less than creditworthy prospects with a particular [lender] on the basis that when it fails, they get a share of the spoils”.
Bibby, which provides funds for more than 4,000 small and medium-sized companies in the UK, said that sharing termination fees with brokers was “clearly against its code of practice”.
It is understood that Bibby severed ties with at least one of the brokers thought to have benefited from such an arrangement following the Daily Telegraph’s investigation.
A Bibby spokesman said: “We review our policies and disciplinary procedures on a regular basis to ensure no such instances occur [in future].”
The Insolvency Service, Treasury and Business Department are currently ‘looking into’ the industry.