There has been much speculation in the financial press regarding the unregulated status of independent factoring and invoice discounting firms in recent weeks.
While invoice discounting divisions of the big banks are regulated by The Bank of England, British Bankers Association and the Financial Services Association, and US banks’ invoice discounting arms operating in the UK are regulated by the Securities and Exchange Commission, no such statutory regulation covers the independents.
The fear is that, as fierce competition in the market forces prices down, failures will become more likely. One worry expressed is the exposed position of the client if an invoice discounter goes into liquidation. The client who has pledged all their receivables to a corporate identity in liquidation may find that the receiver has control of the receivables without any obligation to fund the client under the original agreement.
