ABFA

ABFA Code of Conduct

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I have been one of the most outspoken of critics of the ABFA in the past for it’s perceived unwillingness to police it’s members but following a coffee with Kate Sharp the CEO of the ABFA recently I have been converted to the light.

The Code of Conduct will never be all things to all men but it’s certainly a good start with the real movement forward coming from the establishment of a Professional Standards Council for the factoring industry plus the appointment of the Ombudsman Service to provide it’s services for dispute resolution.

The Professional Standards Committee will not just be factoring industry insiders but will include a number of external heavyweights as well and it’s their job to ensure that high standards are set and maintained.

I was quoted recently by a national newspaper as saying that “those [lenders] that like to skate on thin ice will continue to do so knowing that ABFA have no teeth or the will to grow any.”

Kate assured me that there is a rather large set of canines growing rather nicely at the moment and the ABFA will use them if necessary to either nibble or bite hard on any of their members that might be considered to be bringing the industry into disrepute.

Having been publically critical I’m happy now to withdraw my reservations and give the ABFA the opportunity to put it’s plans into operation in the hope that it goes a long way towards obviating the need for regulation

ABFA Code of Conduct

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The long awaited code of conduct from the ABFA has been announced and this will be coupled with an independent system of dispute resolution managed by Ombudsman Services.

Further good news is that the ABFA is also establishing a Professional Standards Council which will be mainly comprised of members outside of the industry, and they will consider issues emerging from the complaints system and make recommendations on actions to further repair and enhance the reputation of the industry.

In theory this is good news but it does depend on the will of the ABFA and it’s members to clean up their acts.

One interesting point in the code is that all factoring companies will be required to include a note in their Agreements saying that a commission will be payable to the introducer which I’m sure won’t cause any heartache but the next clause insisting that each factoring company shall provide full details in writing of the amounts involved and the method of calculation of any future commissions if requested, might cause issues for some of the larger broking outfits who insist on commissions way above the levels that are deemed to be the norm within the industry.

Factoring and termination fees. ABFA response

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According to an article in today’s Sunday Telegraph Kate Sharp the chief executive of the Asset Based Finance Association (ABFA) has claimed that they intend to bring in a new code of conduct in January whilst indicating that the association still haven’t a clue what is going on under it’s nose by it’s members by questioning the extent of the problem that everyone seems to know about except the ABFA

Unfortunately the new code of conduct will be heavily watered down from what many people wish to see as they will not be outlawing the sharing of termination fees with brokers claiming laughably that it’s “against competition law”.

I suspect that the real reason could be found under the list of affiliate members / sponsors of the ABFA on their site who comprise many of the brokers who’s noses are firmly in the factoring trough and are quite happy with the status quo

Factoring and the recent bad publicity

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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

Invoice discounting statistics

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The ABFA has recently released it’s statistics for the half year ended 30th June 2012 and whilst many of the statistics are completely meaningless as they are skewed by the inclusion of companies turning over in excess of £100m there are one or two hidden gems.

The number of companies turning over in excess of £50m using invoice discounting dropped from 573 to 559 ( a drop of 14) whilst the amount of funds advanced to the same clients increased by £621m

Unless my logic is wrong it would imply to me that the much larger discounting clients are finding their cash flows coming under increasing pressure and they are using up much more of their facilities than previously