UK200Group members comment on a lack of regulation in the commercial finance product sector
Members of the UK200Group of independent accountancy and law firms have today commented on a lack of regulation in the commercial finance product sector.
Growth Street, a commercial overdraft provider, has said the lack of regulation of commercial finance products offered to limited companies could be the next big mis-selling scandal.
Growth Street is leading a campaign supported by a number of business groups, who feel SMEs are paying more for borrowing than they should because commercial finance providers aren’t required by law to quote statistics, such as annual percentage rates (APRs).
Duncan Montgomery, Tax Partner at UK200Group member firm Whittingham Riddell:
SMEs are already moving in to a more claims based environment with their banks. Complex financial instruments were in the past made available to businesses, often around interest rate hedging or currency swaps, and while in principle some understanding was had, there have been a great number of settlements made by banks on the basis that the product purchased and sold was misunderstood.
Claims on interest itself may be next, and we would urge all SMEs to really examine the banking cost lines on their accounts and management information to make sure it ties to the expectation they have. A periodic review should ensure fuller understanding or give opportunity to test the water elsewhere.
Jonathan Russell, Partner at UK200Group member firm ReesRussell:
Many might consider the cost of borrowing for small businesses too high and in truth it very often is considering the other onerous conditions applied. However, there are many who would say availability of funding for small businesses, particularly unsecured funding, is a bigger issue than the cost and indeed many would pay more in costs just to have the funding available. Whilst the commercial lenders trumpet their increased lending to SMEs much of it has been consolidating existing overdraft facilities.