Factoring companies in the UK are self regulated, but come under the direct authorisation of the following three regulators: UK Finance, FCA and NACFB.
As a business owner you may have an invoice finance facility and wondered how are factoring companies regulated.
Invoice finance is a brilliant product for businesses that require working capital but as with any financing agreements, there are charges and potential pitfalls, so it is good to know how the industry is regulated and how you, the consumer, are protected should you have need to complain.
Is factoring regulated?
No, factoring is not regulated in the UK. Regulation by the Financial Conduct Authority has been spoken of, but this would almost certainly increase the costs of factoring.
FCA regulation costs between £2,000 and £50,000 per company who applies so these costs would inevitably get passed onto consumers.
Who regulates factoring companies?
UK Finance regulates factoring companies. The invoice finance industry has chosen to be self-regulated in regards to the factoring facilities they offer. The three main bodies that regulate factoring companies and asset based invoice financing are:
The Financial Conduct Authority (FCA)
The FCA are an independent, non-governmental body that regulates the UK financial services industry. They set regulatory standards for the industry to ensure a fair deal for all participants.
Should you have raise to complain about any financial service (including factoring services), which the original provider cannot help with, the FCA is the place to go.
If there is a dispute between yourself and a factoring company over a contract, then the FSA will be able to assist. You should ensure you have checked your contract and have detailed records of all transactions and correspondence.
FCA Head Office
12 Endeavour Square
Phone: 0800 111 6768
UK Finance (UKF)
UK Finance are the banking and finance trade association, formed on the 1st of July 2017. They have taken over and superseded the operations of the Asset Based Finance Association (ABFA), who were the trade body for the invoice finance sector up-to that date.
Their main activity is to represent around 300 firms across the industry. They act to enhance competitiveness, support customers and facilitate innovation.
Working for and on behalf of their members UK Finance are here to promote a safe, transparent and innovative banking and finance industry. They also offer research, policy expertise, thought leadership and advocacy in support of their work.
Providing a single voice for a diverse and competitive industry. Operational activity includes enhances members’ own services in situations where collective industry action adds value.
1 Angel Court,
Phone: 020 7706 3333
National Association of Commercial Finance Brokers (NACFB)
National Association of Commercial Finance Brokers was established in 1992. Their mission is to support commercial finance brokers with their endeavours to source funding solutions for UK SMEs.
The association comprises over 2,000 commercial finance brokers covering the whole of the UK. Brokers are required to have Full or Limited Consumer Credit Permission, Professional Indemnity Insurance, a Data Protection Licence, and a strong track record with nationally recognised lenders.
The NACFB works to regulate brokers, asking them to follow a Code of Conduct that was formally recognised by the Office of Fair Trading in 1994.
Phone: 020 7101 0359
UK Finance, the UK invoice finance industry body, recently launched a code of known as “The invoice finance and asset based lending (IFABL) standards framework” for their members and an Ombudsman process, to back up arbitration with customers.
The first year of operating the resolution process, its members which have over 45,000 clients, there was only 13 complaints received by the Ombudsman.
This shows that self regulation is working due to the low complaints to the Ombudsman.
Is invoice factoring regulated in the UK
No, invoice factoring is not regulated in the UK by the FCA.
Is Invoice Discounting regulated
No, invoice discounting is not regulated in the UK by the FCA
Are factoring companies regulated?
No, factoring companies are not regulated in the UK. the are self regulated over seen by UK Finance.
Is invoice factoring a regulated activity?
No, invoice factoring is not a regulated activity in the UK. This means you do not a FCA license or permissions to sell the product.
Factoring companies in the United Kingdom are subject to regulations and oversight by various entities to ensure compliance and protect the interests of businesses and consumers. The Financial Conduct Authority (FCA) is the primary regulatory body responsible for overseeing financial services in the UK, including factoring. Factoring companies that provide regulated activities, such as debt administration or debt collection, must be authorized and regulated by the FCA.
The FCA sets out rules and guidelines that govern the conduct and operations of factoring companies, ensuring they adhere to high standards of professionalism, transparency, and consumer protection. These regulations cover areas such as licensing requirements, capital adequacy, client money protection, complaints handling, and the fair treatment of customers.
By regulating factoring companies, the UK authorities aim to promote a fair and trustworthy factoring industry while safeguarding the rights and interests of businesses engaging in invoice factoring transactions.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.