Most of the industry will be aware of the recent bad publicity that factoring has had in the quality press and of course many will be laughing at the discomfort being felt by one particular factoring company but whilst the so called revelations are obviously damaging to that factoring company the fallout out is also damaging to companies looking at factoring for reasons that may not be so obvious.
Two of the case histories used appear to portray the factoring company in a very poor light but most people in the industry will read between the lines and it was fairly obvious that one of the companies mentioned was pre-invoicing and whilst I’m not sure what the other one was up to there was obviously a major problem there if the company attended a meeting with the factoring company accompanied by a friendly insolvency practitioner.
What is annoying about the recent bad publicity is that there is one particular factoring company that I refuse to deal with as I have severe reservations about their ethics and I believe them to be a company that has profited more than others from the demise of their clients judging from the huge number of complaints that I have received about them. This is not the factoring company that has featured in these press stories
I have no doubt that the salesmen from this factoring company will have downloaded the press stories to their laptops and if they hear that a company that they are negotiating with is talking to the other company they will show them the articles in order to win the deal for themselves with the result that all of this adverse publicity will be helping the rogue factor get their claws into yet more unsuspecting companies.
There are industry practices that I am not happy with and would like to see curtailed and most of them centre round the early termination of factoring facilities whether through the insolvency of the client or through the desire of the client to change factors.
Many of the problems within the industry are actually driven by greedy and unscrupulous brokers who hold the factoring companies to ransom. Some of the insolvency practitioner owned outfits make it quite plain to the factors that if they don’t give them the lucrative insolvency work they won’t receive any leads from them whilst some of the very high profile broking firms insist on such high introductory fees that it makes it unprofitable for the factoring companies to take on their introductions which often leads to them looking at alternative ways to increase their profitability.
Perhaps ABFA could gather the factoring companies together and get them to all agree to a maximum commission level to be payable to introducers which might then result in brokers giving enquiries to the most appropriate factoring company and not the one that pays them the most.
Wishful thinking I know
The Telegraph has regurgitated the case of the rogue employee of a factoring company offering to pay commission on termination fees to a broker for the third week running which yet again is misleading due to the selective quoting used in the article.
“Last weekend, The Sunday Telegraph revealed that a worker with (a named factoring company), offered inducements to a finance broker based on supplying companies deemed likely to fail.
I haven’t seen the letter in question but the implication is that it was about the sharing of termination fees whereas I wouldn’t mind betting that the offending phrase was just a small paragraph in a much longer letter outlining the whole basis of the relationship between the factor and the broker and by selectively quoting that paragraph out of context it changed the whole meaning of the letter.
The article also fails to mention that the sharing of termination fees with brokers was strictly against the factoring company’s policy and the employee involved acted without authorisation.
Whilst I am firmly against the sharing of termination fees with brokers I am also of the belief that publishing half truths will be detrimental to anyone wanting change as it gives more ammunition to those that claim there isn’t a problem