Non recourse factoring issues with bank owned factoring company

Chatting to a friend in the independent factoring sector he told me that he had been approached by a client of a major high street bank owned factoring company as they had suffered a reasonably significant bad debt which was covered by the bank under their non recourse factoring facility limits and as a result the factoring company suddenly decided to reduce the credit limits on their rest of their customers with a resultant reduction in available funding.

As the client was struggling to operate on the new reduced funding levels the obvious next step was to transfer to a more flexible factoring company but they were told in no uncertain terms that if they did they wouldn’t pay out on the bad debt.

It would seem that this same well known name also claims that if any of their clients becomes insolvent and enters into a CVA or Administration, that also invalidates any bad debts that are still in the system.

To my mind this is highly unethical as I’m sure the same people that thought that one up would be the first to complain if they had a motor insurance claim and the insurers said that they wouldn’t honour it if they transferred to a new insurance company on renewal date.