March 2017 Credit Management magazine

OPINION
RAISING THE BAR IN
COMMERCIAL FINANCE
The independent chair of the Asset Based Finance Association’s (ABFA) Professional Standards
Council, Lucy Armstrong, considers the regulation of financial services provided to SMEs and looks
forward to the year ahead.
Lucy Armstrong
THIS year will see the fourth anniversary
of the independent Standards
Framework for invoice finance and
asset-based lenders, which was
established in 2013 and which covers the
Members of the ABFA.
Established by the ABFA and now
overseen by the independent Professional
Standards Council (PSC) – which it has been
my privilege to chair since its inception –
along with the PSC itself, the Framework
incorporates an independent Complaints
Process provided by the specialists at
Ombudsman Services, and the ABFA Code.
The latter sets the standards that ABFA
members commit to meeting in the treatment
of their clients, and the former provides an
independent means of investigation and,
where necessary, redress if those standards
are not met.
It is an interesting moment to reflect on
the Standards Framework. Its development
preceded much of the work undertaken by
the FCA since it published its paper on the
protection provided to SMEs as users of
financial services at the end of 2015, the
response to which is eagerly awaited.
The Framework has certainly been
designed to address familiar challenges.
These have included: how to establish
a system that focuses on principles and
outcomes rather than processes; recognising
that SMEs come in all shapes and sizes and
the needs of the very smallest businesses
will be very different to those of a mid-sized
corporate; and where the balance should
be struck between the rights of a small
business as a user of financial services and its
responsibilities as the same.
These are all thorny questions of
course. They are also the ones that the
Lending Standards Board (LSB) is currently
considering in the development of Standards
of Lending Practice for businesses. It is hard
to claim that we have found all the answers,
though we believe that the approach taken
forward by the ABFA and the PSC (which is
voluntary as providers choose to follow it and
are not obliged by law to do so) has so far
been effective for both clients and finance
providers.
Indeed, the buy-in from ABFA Members
has been the most striking feature of this
journey. In establishing and supporting the
system, the industry has recognised the
importance to its future growth of providing
a clear statement of the standards that will
be met, and an accessible and independent
means of redress if they are found not to have
been. In short, the industry has shown it is
willing to take responsibility for its own future.
The Framework will continue to evolve,
however, and we were pleased to contribute
to the wider debate around the FCA paper
and look forward to continuing the discussion.
Turning to evolution, from January the
Framework expanded to also cover the
ABFA’s revised Inter Member Transfer
Process. This process is designed to make
it as easy as possible for a client business
to switch invoice finance provider and sets
out more clearly the commitments that the
ABFA members involved will meet. If they
are not met, the client can bring a complaint
against the member through the independent
Complaints Process. In the PSC’s experience
this has not been a particularly contentious
area for clients, but this development is all
part of the longer-term work to make the
industry’s products and services even more
accessible.
Finally, the ongoing work to merge a
number of the financial services’ trade
associations including, potentially, the ABFA,
has had some profile recently. The PSC is
agnostic on the wider issue – how financial
services firms choose to organise their
representation and advocacy is up to them.
The PSC’s objective is to ensure that there
is no detriment to users of financial services
in terms of the protections afforded, and the
methods of redress available, to them. If the
merger goes ahead with the ABFA involved
then we will be expecting that the delivery of
the objectives of the Standards Framework
will be safeguarded, even if it may be done
through different mechanisms in the future.
Lucy Armstrong is Independent Chair of the
Professional Standards Council.
abfa.org.uk/standards
lucy.armstrong@the-alchemists.com
12 March 2017 www.cicm.com
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