Bank Referrals Scheme- Another Way to Rip off UK SMEs?

Bank Referrals Scheme- Another Way to Rip off UK SMEs?

James Sherwin Smith

CEO at Growth Street

Views 249

Bank Referrals Scheme- Another Way to Rip off UK SMEs?

02.11.2016 07:00 am

Any measure that raises awareness of non-bank business finance and promotes greater competition should be welcomed.  However, while we know banks will now have to pass rejected applications for business finance to three designated platforms under this new scheme, it’s unclear what protections are in place to help businesses get the best deal from the proposed alternative finance providers.

  • Are the designated platforms required to display offers from all alternative finance providers, so businesses can see the whole market?
  • Given that designated platforms are paid commission by the finance providers, does this mean firms will be steered towards high cost finance providers that either pay the most commission or are the most likely to say yes?
  • If the designated platforms are competing with each other for each referral opportunity, will businesses be encouraged to make a quick decision, which could mean that key terms and conditions are glossed over?

Businesses should be vigilant, as this system may result in firms not getting the best deal available, and could potentially result in mis-selling.  One aspect that could help protect businesses would be for finance providers to disclose the APR for their product. The Competition and Markets Authority has already ruled in favour of this, but only for unsecured business lending up to £25,000.

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