Promoting & Representing the Interests of members
The Asset Based Finance Association (“ABFA”) is a UK and Ireland based trade association representing the Invoice Financing Sector. The ABFA is an amalgam of three rival industry bodies unified in 2007. They claim that its members have been providing businesses with liquidity and working capital for over 50 years. However, the product itself dates Bank hundreds of years before the formation of the ABFA.
In 2010 ABFA’s members in the UK and Ireland provided financing to around 42,000 businesses (serving primarily the manufacturing, distribution, transport, service, retail and construction sectors) and transacted over £212 billion of clients’ invoices each year. The industry advanced in excess of £14 billion against invoices and other assets such as stock, property, plant and machinery. With these impressive figures, you would expect the Financial Services Authority or some other professional independent authority would regulate this sector. Unfortunately, not. The whole sector is completely unregulated. Effectively the industry regulates itself through a voluntary code of conduct. Industry pundits have speculated for sometime how long it will be before regulation will be brought in. Nothing appears imminent.
There are currently three different types of ABFA membership available:
- Full Member
- Worldwide Group Member
- Worldwide Associate Member
Full Membership of the ABFA is open to UK and Irish companies only. Worldwide Group Membership is open to any company belonging to a group where there is at least one Full ABFA Member. Worldwide Associate Membership is designed for any company where there is no Full ABFA Member. In addition, in order to be a Full Member of the ABFA an organisation must meet the following requirements:
- Be established for more than 12 months
- Have a net worth of over £1 million
- 75% of the business must come from Asset Based Finance
- Their clients’ debts must not have been pledged to any lenders beyond that advanced to each individual client
The financial turmoil has left Factoring and Invoice Discounting customers wondering, “how safe is my Factoring Company”. The ABFA’s entry criterion does little to reassure concerned users. Members range from well-known High Street Banks, Small Banks, Merchant Banks, Building Societies, General Finance Houses and independent businesses. Therefore, being a member of the ABFA gives no direct confidence over the financial standing of the ABFA member for the user. After all the aim of the ABFA is “Promoting & Representing the Interests of members” not acting as a Financial Regulator.
One question that we keep being asked is “what code of conduct do ABFA members use”. The ABFA do produce a code of conduct, which all members must accept (you can review a copy here). However, the code of conduct has no powers of arbitration or alternative dispute resolution for instance. The ABFA’s Code of Business Practice, July 2008 Edition states that:
“The ABFA expects all members to adhere to this Code. However third parties should be aware that under its Memorandum of Association, publicly filed at Companies House, the ABFA is not a public regulatory authority and has no financial or other responsibility to any persons arising out of the financial or other dealings of its members”
The ABFA seems to act more like a training, reporting and lobbying body. They pro-actively publish their role as:
- Education and Training
- Industry News
- Member Guidelines
- Public Relations
- Source of Industry Information
Asset Based Finance Association presently publicises that it exists to “promote & represent the Interests of members”. In the absence of direct government financial regulation, the industry has sort to an extent to self regulate through the ABFA. While this has to be welcomed unfortunately, amid the turmoil of the latest, phase of the financial crisis, in reality it offers little by way of tangible benefit to users of ABFA’s members services.
Using a specialist Factoring, Confidential Invoice Discounting or Asset Based Lending Broker like firstfactoruk.com can provide a valuable insight into ABFA members services.