I guess that quite a few Factoring Blog readers will have come across Brian Moore and his Asset Based Finance Associates by now as he has been nibbling away on Twitter amongst other places for quite a while about his disquiet with the factoring industry and he is leading a campaign for it’s regulation.
I must admit that when I first came across him I had mixed feelings as I agreed with many of the points that he was making but not all of them and to be honest I think that his £5billion clawback tax is a bit silly even if I can understand his reasoning.
I have made my own feelings known in print and in private about the unhealthy relationship between certain factoring companies and the insolvency profession and the fact that putting a factoring client into Administration can be highly lucrative for the factoring company involved.
As perhaps the doyen of the factoring industry I have seen many changes since I first got involved some 45 years ago but it’s only in recent years that the independents have looked at other ways to supplement their income and decided that maximizing income from failed clients is one way to do it and the boss of one factoring company recently told me that one quarter of their profits come from termination fees
Mr Moore had the misfortune to be factoring with the company that possibly has the worst reputation for termination fees but it is a practice that is becoming more and more widespread and the spoils for both the factoring companies and the insolvency practitioners can be quite lucrative.
In recent years we have also seen a proliferation of insolvency practitioners setting up broking divisions in a mad scramble to introduce new clients to factoring companies in order to grab a slice of the lucrative insolvency work from the factors in return which is something I personally find to be disturbing.
If I had my way insolvency practitioners that had broking arms should be barred from taking on insolvency work from factoring companies as it could be said that there might be a conflict of interest or if preferred they could handle the insolvency work as long as they didn’t act as brokers to that factor.
In any event I think that most industry insiders are aware that not everything within the industry is rosy and privately they would agree that regulation of the industry is long overdue and necessary to cut down on some of the factoring company excesses.