ABFA agrees to new code to protect small firms
22nd March 2013 | News
The Asset Based Finance Association (ABFA) has agreed to a new code of conduct and dispute resolution service in a bid to inspire confidence in asset-based lending among small businesses.
As an industry that provides around £17bn of credit to SMEs, with ABFA’s members lending cash to small businesses against their assets – usually advancing cash on invoices by taking security over companies' debtor books – it has taken the decision to review its code of conduct and implement a new dispute resolution service.
A recent Telegraph investigation highlighted a number of poor practices after a series of complaints from business owners, who felt they had nowhere to turn if something went wrong with their facility.
Subsequently, an external, independent system of dispute resolution "managed by Ombudsman Services" has been established, say the ABFA.
Lenders will be obliged to follow the ombudsman’s decision, as well as provide clear and concise explanations of contractual fees to clients. However, the disputes services will only be open to businesses with annual sales of less than £6.5m, although the ABFA insists this will cover around 80 per cent of clients.
The ABFA, which represents 95 per cent of the asset-based lending industry in the UK, said its members have three months to comply with the new code of conduct.
Kate Sharp, the group’s chief executive, said it was "an important step forward for the industry".
“It will ensure that small businesses using asset based finance will have clear options available to them if they feel they have been treated unreasonably by one of our members," she said.
John Onslow, chairman of the ABFA, said any member that "consistently breaks the code" will be expelled.