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  • Home
  • About
  • Podcast
    • Summaries
    • Articles
  • Invoice Finance
    • Basics
      • What is Invoice Finance?
      • What is Reverse Factoring?
      • What are Trade Receivables?
      • What is the Cash Conversion Cycle?
      • What is Days Inventory Outstanding?
      • What is Days Sales Outstanding?
      • What is Days Payable Outstanding?
    • Advanced
      • Invoice Validation and Fraud Detection
      • Reasons Why Invoice Finance is Better than a Bank Loan
      • How to Choose the Right Factoring Firm for Your Business
      • A Closer Look at Factoring Agreements
      • What is Trade Receivables Securitisation?
      • Breakdown of the Costs for Factoring
    • Factoring
      • Why Companies Use Invoice Factoring
      • What Companies are Suitable for Invoice Factoring?
      • Factoring and Invoice Discounting
      • How Factoring Works
      • Asset Based Lending
      • Is Factoring Right for Your Company?
      • Accounting for Factoring
      • How a Company Enters into a Factoring Agreement
      • The Costs Involved in Factoring
      • Changing Factoring Company
      • The Relationship Between the Factoring Company and the Debtor
      • Legal Aspects of a Factoring Company Pursuing Payment Through the Courts
      • Factoring in the Construction Industry
    • Fraud
      • Types of Invoice Fraud
      • How to Combat Invoice Fraud
    • E-Invoicing
      • Legal Status of Electronic Invoicing
      • The Benefits of E-Invoicing
      • Implementing an E-Invoice System
      • E-Invoicing Adoption in Mexico and The Rest of the World
  • Brokers
    • UK Brokerage Firms
  • Factoring Firms
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      • UK
      • France
      • Germany
      • Italy
      • Spain
      • Holland
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      • Canada
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      • New Zealand
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      • Enhancing Fintech Interoperability: Digitalizing Trade Documents for Efficiency and Security
      • The 7 Types of AI and Their Implications for the Future
      • Transforming Trade Finance: The Role of AI
      • The Different Programming Languages Used in Fintech Companies and Financial Institutions
      • UK and US Authorities Intervene in AI Sector
      • Web3 Applications and the Future of Trade Finance
      • What is Web 3?
      • What Can Fintech do for You?
      • What is Fintech?
      • Tokenisation of Finance
      • Payment Services in the Invoice Finance Sector
      • What is ChatGPT and Why the Fuss?
  • Rating Agencies
  • Securitisation
    • Deal Arrangers
    • Book Runners
    • Articles
      • The Roles of Deal Arrangers and Book Runners in Securitization
      • What is Trade Receivables Securitisation?
      • The Appeal of Trade Receivables Securitisation
      • Risk Mitigation for Trade Receivables Securitisation
  • Legal
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      • A Guide to Accounts Receivable Purchase Agreements and Invoice Discounting Agreements
      • The Challenges of KYC and AML Checks
      • What is The Model Law on Electronic Transferable Records (MLETR)?
      • Snapshot of Factoring Legal Schemes in England and Wales
      • How are UK Factoring Firms Regulated?
      • What is ISO20022 and Why is it Important?
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      • Financial Crisis or Not?
      • Credit Suisse Bailout
  • Credit Insurers
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      • Credit Insurance in Trade Receivables Financing
      • The Benefits of Credit Insurance in Invoice Finance
      • Eligibility Requirements for Capital Relief by Using Credit Insurance
      • What are Export Credits and Country Risk Classifications?
      • How the War in Ukraine Affects the Price of Credit Insurance for Trade Finance
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Home Legal

How are UK Factoring Firms Regulated?

John Goodden by John Goodden
January 31, 2023
in Factoring, Invoice Factoring, Invoice Finance, Legal, Reverse Factoring
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Download file | Play in new window | Duration: 4:32 | Recorded on November 11, 2022

There aren’t any special laws in the UK concerning factoring. Rather there are rules concerning banking, financial contracts etc., but nothing that sets out specifically how factoring firms are supposed to conduct themselves.

The obvious authority to rule on these matters would be the Financial Conduct Authority (FCA), but an application to the FCA to determine financial fair play would cost each company between £2,000 and £50,000. These are expenses that would be passed onto the customer. In the highly competitive market of trade receivables finance such extra costs would be detrimental to the sector.

Currently, there are three main bodies that regulate factoring companies in the UK.

UK Finance (UKF)

Firstly, there is UK Finance. It is an independent body that has set a number of rules and principles for its members to follow. It is this body that oversees invoice finance in the UK. As it is a non-government body, the factoring sector in the UK is essentially self-regulating.

    UKF had its inception on 1st July, 2017. They took over the role of the defunct Asset Based Finance Association (ABFA) which had previously regulated factoring. UK Finance has about 300 firms on its books all connected to the factoring sector.

    The main goal of UKF is to promote the values of safety, transparency and innovation in the banking and finance industries. They also serve as a voice for its diverse members.

    The Financial Conduct Authority (FCA)

    As mentioned already, factoring companies don’t pay the FCA to regulate factoring or certify certain companies. Rather they are a non-governmental body that champions fairness and transparency in financial dealings. If a company or individual feels they have been unfairly treated in a financial transaction the FCA will pursue the matter. Thus, if a company has a dispute with a factoring company, then the FCA can provide independent resolution services as well as clarify the legal context.

    Being an NGO means that the FCA doesn’t carry the weight of a government body when it intervenes in disputes. It can advocate for change but not legislate change.

    National Association of Commercial Finance Brokers (NACFB)

    The National Association of Commercial Finance Brokers was founded in 1992 with the mission statement to provide support to commercial finance brokers, especially in their role supporting funding solutions for Small and Medium-sized Enterprises (SMEs).

    There are about 2,000 members of the NACFB. Members are required to abide by a Code of Conduct. The code was recognised in 1994 by the Office for Fair Trading.

    Moreover, members in order to carry out commercial financial services must show they have full or limited Consumer Credit Permission, Professional Indemnity Insurance and a Data Protection Licence.

    A company considering using factoring services for the first time would be advised to approach a company that is a member of NACFB.

    In Summary

    Since the factoring industry is largely self-regulating, there is no need for any company offering invoice finance to join any of the above bodies. There are Acts of Parliament that deal with insolvency, notifying debtors etc. (see our post Legal Regulation for England and Wales) and other specific financial practices. And as long as these laws are followed, a factoring firm is free to act as it chooses in terms of procedures and fees.

    UK Finance, the Financial Conduct Authority and The National Association of Commercial Finance Brokers do attempt to advocate best practice and seek to give redress against poor practice. Membership of UKF and the NACFB indicates to prospective clients that factoring firms do follow regulatory guidelines, just voluntarily.

    Tags: Asset Based Finance Associationfactoring regulationsNational Association of Commercial Finance BrokersOffice for Fair TradingThe Financial Conduct AuthorityUK Finance
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    • Home
    • About
    • Podcast
      • Summaries
      • Articles
    • Invoice Finance
      • Basics
        • What is Invoice Finance?
        • What is Reverse Factoring?
        • What are Trade Receivables?
        • What is the Cash Conversion Cycle?
        • What is Days Inventory Outstanding?
        • What is Days Sales Outstanding?
        • What is Days Payable Outstanding?
      • Advanced
        • Invoice Validation and Fraud Detection
        • Reasons Why Invoice Finance is Better than a Bank Loan
        • How to Choose the Right Factoring Firm for Your Business
        • A Closer Look at Factoring Agreements
        • What is Trade Receivables Securitisation?
        • Breakdown of the Costs for Factoring
      • Factoring
        • Why Companies Use Invoice Factoring
        • What Companies are Suitable for Invoice Factoring?
        • Factoring and Invoice Discounting
        • How Factoring Works
        • Asset Based Lending
        • Is Factoring Right for Your Company?
        • Accounting for Factoring
        • How a Company Enters into a Factoring Agreement
        • The Costs Involved in Factoring
        • Changing Factoring Company
        • The Relationship Between the Factoring Company and the Debtor
        • Legal Aspects of a Factoring Company Pursuing Payment Through the Courts
        • Factoring in the Construction Industry
      • Fraud
        • Types of Invoice Fraud
        • How to Combat Invoice Fraud
      • E-Invoicing
        • Legal Status of Electronic Invoicing
        • The Benefits of E-Invoicing
        • Implementing an E-Invoice System
        • E-Invoicing Adoption in Mexico and The Rest of the World
    • Brokers
      • UK Brokerage Firms
    • Factoring Firms
      • Europe
        • UK
        • France
        • Germany
        • Italy
        • Spain
        • Holland
      • North America
        • USA
        • Canada
      • Australasia
        • Australia
        • New Zealand
    • Hi-Tech
      • Digital Platform/IT/Software Providers
      • UK Fintech
      • Articles
        • Enhancing Fintech Interoperability: Digitalizing Trade Documents for Efficiency and Security
        • The 7 Types of AI and Their Implications for the Future
        • Transforming Trade Finance: The Role of AI
        • The Different Programming Languages Used in Fintech Companies and Financial Institutions
        • UK and US Authorities Intervene in AI Sector
        • Web3 Applications and the Future of Trade Finance
        • What is Web 3?
        • What Can Fintech do for You?
        • What is Fintech?
        • Tokenisation of Finance
        • Payment Services in the Invoice Finance Sector
        • What is ChatGPT and Why the Fuss?
    • Rating Agencies
    • Securitisation
      • Deal Arrangers
      • Book Runners
      • Articles
        • The Roles of Deal Arrangers and Book Runners in Securitization
        • What is Trade Receivables Securitisation?
        • The Appeal of Trade Receivables Securitisation
        • Risk Mitigation for Trade Receivables Securitisation
    • Legal
      • Law Firms
      • Articles
        • A Guide to Accounts Receivable Purchase Agreements and Invoice Discounting Agreements
        • The Challenges of KYC and AML Checks
        • What is The Model Law on Electronic Transferable Records (MLETR)?
        • Snapshot of Factoring Legal Schemes in England and Wales
        • How are UK Factoring Firms Regulated?
        • What is ISO20022 and Why is it Important?
    • Rates
    • Economy
      • Economic Indicators
      • Articles
        • The Collapse of the Russian Rouble: An Historical Analysis and Current Implications
        • The Current State of the UK Economy
        • Economic Forecast for the UK in 2023
        • Economic News for 2022
        • Financial Crisis or Not?
        • Credit Suisse Bailout
    • Credit Insurers
      • Credit Insurers
      • Articles
        • Credit Insurance Legal Aspects
        • Credit Insurance in Trade Receivables Financing
        • The Benefits of Credit Insurance in Invoice Finance
        • Eligibility Requirements for Capital Relief by Using Credit Insurance
        • What are Export Credits and Country Risk Classifications?
        • How the War in Ukraine Affects the Price of Credit Insurance for Trade Finance
    • Associations
    • ESG
      • ESG Articles
      • ESG Resources
    • Crypto Finance
      • Ripple (XRP) Wins Latest Battle with SEC
      • UK Passes Financial Services and Markets Act 2023
      • Latest about the UK Regulatory Proposal for Crypto Assets
      • How will MiCA (Markets in Crypto Assets) Regulation Affect Trade Finance and the Banking System?
      • Markets in Crypto Act (MiCA) Becomes EU Law
      • An Introduction to EU’s Markets in Crypto-Assets (MiCA) Law 
      • Supply Chains and Blockchain Technology
      • The DeFi Revolution
      • How DeFi Fulfils the Functions of Finance
      • Taxonomy of Crypto Assets
      • Crypto Currencies
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      • Interview with Tradeshift
      • Interview with Kyriba
      • Interview with Orbian
      • Interview with Crossflow
      • Interview with Dancerace
      • Interview with BlackLine
      • Interview with Novicap Part One
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      • Interview with Karl Page
      • Interview with A P Trade Finance
      • Interview with vabble
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