The Asset Based Finance Industry is an unregulated financial sector supplying a range of asset based financial products to over 41,000 businesses, employing around 3 million people, transacting over £260 billion of clients' invoices each year.
The industry acts within the confines of the Enterprise Act 2002 which was created to rescue viable companies through administration and allow the finance industry to fund business through floating or fixed charges secured against invoices or assets.
Unfortunately, when the act was created, the legal abuse of an unregulated industry
and the profits that could be made out of termination fees -
The asset based finance industry is neither regulated externally nor by itself, which cannot be allowed to continue.
The Financial Services Ombudsman, which polices banks and financial services firms that are regulated by the Financial Services Authority, has no control over Asset Based Finance Companies which are not regulated by the FSA unless they sign up voluntarily. The ombudsman, the FSA and the Office of Fair Trading, all have no power to intervene in disputes between the companies and their clients, both exiting and former.
The Asset Based Associates
The objective of the group is to ensure the asset based finance industry is regulated by an independent ombudsman with substantial powers funded by the industry. To break the potential incestuous relationship between administrators of failed companies and the members of this industry that appoint them.
The industry has made substantial income (multi billion) from the sales ledger of companies that have gone into administration at the expense of HMRC and creditors.
We are lobbying the government to apply a £5bn CLAWBACK TAX on the industry. This tax is not a one off event but tied into the reforms of the industry. To achieve its objectives the Associates will be speaking to the government at all levels to address the serious issues that need to be reformed.
The Clawback Tax on the members of the industry body is fair as it is only getting the money that we believe should have gone to HMRC in the first place.
Our campaign is run by a group of like minded people from business people, trade unionists, politicians and banking reform campaigners who believe that the asset based finance industry needs substantial reforms to it’s almost non existent regulatory environment that the industry currently enjoy.
The Unregulated Asset Based Finance Industry
The Financial Services Ombudsman, which polices banks and financial services firms that are regulated by the Financial Services Authority, has no control over asset based finance firms which are not regulated by the FSA unless they sign up voluntarily.
The ombudsman, the FSA and the Office of Fair Trading, all have no power to intervene in disputes between the company and their clients, both exiting and former.
A Regulator for the Asset Based Finance Industry
An independent regulator must be appointed to oversee and regulate the industry with substantial powers, the post and support staff would be funded by the industry.
The Appointment of Administrators
There are clear concerns about the relationship between the based finance industry and the administrators that they appointment when their clients going into administration.
Factoring Brokers are not independent Financial Advisors (IFA’s) or in a number of cases independent being owned either by Insolvency Practitioners or Factoring Companies.
One of the largest Invoice Finance brokers in the industry is owned by a firm of IPs and all the majors IPs seem to have an associated IF brokerage.
“There could be pressure exerted from the broker to put business back to their IP arm; in the worst case it could be – we give you a client – you bust them – you get the termination fees and we get the administration – everybody wins, twice! Oh …but not the client.” Invoice Factoring Company
Securities and Termination Fees
There are serious concerns that the asset based finance industry has made substantial profits at the expense of the Government potentially to the tune of billions of pounds that should have gone to HMRC and creditors.
The implication to business owners is often minimal when the administrators are appointed and the company takes a substantial income with the creditors and often HMRC that lose out on the funds being taken.
Small to medium sized businesses are being pushed by banks (which are regulated) and by companies operating solely in this sector to use unregulated products in the knowledge there is no ombudsman or right of address to appeal when they feel wronged.
We are demanding that the government review the sale of any unregulated asset based products immediately pending a full review and substantial reforms of the industry, including an ombudsman with real powers and a multi billion pound claw back tax on the industry.