Bank referral scheme: Difference between revisions
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| ⚫ | The UK government-mandated bank referral scheme was created by the Small Business, Enterprise and Employment Act 2015<ref name=":0">[http://www.legislation.gov.uk/ukpga/2015/26/section/5/enacted Small Business, Enterprise and Employment Act 2015 2015 c. 26PART 1Financial information about businessesSection 5]</ref> to support businesses unable to access finance from major UK banks. The scheme was launched in November 2016 after more than two years of deliberation.<ref>{{Cite news|url=http://www.altfi.com/article/2361_bank_referral_scheme_goes_live|title=Bank referral scheme goes live - AltFi News|newspaper=AltFi|access-date=2016-11-02}}</ref> |
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{{Orphan|date=November 2016}} |
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| ⚫ | The bank referral scheme imposes a [[Statutory law|statutory duty]] on selected major UK banks to pass on businesses who have been unsuccessful in applying for finance to designated finance platforms, who will then contact them in order to potentially refer them to suitable alternative finance providers. |
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{{globalize/UK|date=October 2016}} |
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| ⚫ | The government-mandated |
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Businesses who have been unsuccessful in a [[credit]] application process with a bank will be asked for their permission to have their financial information passed to designated finance platforms, who can contact the business in a regulated time-frame. The three designated finance platforms selected are [[Funding Options]], Funding Xchange and Bizfitech<ref>{{Cite news|url=https://www.gov.uk/government/news/new-matchmaking-service-for-small-businesses-looking-for-finance|title=New matchmaking service for small businesses looking for finance}}</ref>. |
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== The statutory format of the referral scheme == |
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| ⚫ | The idea of the bank referral scheme was advocated by the [[Liberal Democrats]] under [[Nick Clegg]] with the former Liberal Democrat [[Secretary of State for Business, Energy and Industrial Strategy|Business Secretary]], [[Vince Cable|Sir Vince Cable]] hinting at it in March 2014.<ref>{{Cite web|url=http://www.altfi.com/events/altfi_europe_summit_2014|title=AltFi Europe Summit 2014|last=|first=|date=|website=|publisher=|access-date=}}</ref> The then [[Chancellor of the Exchequer]], [[George Osborne]] announced in August 2014<ref>{{Cite web|url=http://www.altfi.com/article/0345_referral_system_confirmed_as_government_plans_for_uk_to_rule_the_world_of_fintech/|title=Referral System Confirmed as Government Plans for UK to Rule the World of Fintech|last=|first=|date=|website=|publisher=|access-date=}}</ref> the scheme; after a five-month industry consultation. The [[British Business Bank|British Business Bank]] (the UK's state development bank) ran the assessment process to recommend three designated finance platforms on behalf of [[HM Treasury]]<ref>{{Cite web|url=http://british-business-bank.co.uk/finance-referral-platforms-policy/|title=British Business Bank: Finance Platforms}}</ref>. |
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| ⚫ | The |
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The bank referral scheme was launched on on 1 November 2016<ref>{{Cite news|url=https://www.gov.uk/government/news/new-matchmaking-service-for-small-businesses-looking-for-finance|title=New matchmaking service for small businesses looking for finance}}</ref>. |
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For the Referral Scheme to perform as envisaged by the UK Government, the businesses affected must give formal permission to the bank to pass on their information to one platform or too many referral platforms. Business owners have expressed concern and confusion as to how the referral scheme will perform in practice.<ref>{{Cite news|url=http://www.thisismoney.co.uk/money/smallbusiness/article-3318699/Bank-referral-scheme-jilted-small-businesses-faces-late-start.html|title=Bank referral scheme for jilted small businesses faces late|last=OWEN|first=VICKI|date=14 November 2015|work=|access-date=|via=}}</ref> |
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== Concerns == |
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Concerns have centred around the high-[[interest rate]]s that are charged by alternative finance providers,<ref>[http://www.bankofengland.co.uk/publications/Pages/speeches/2015/851.aspx McCafferty Ian, Bank of England, speech in Bloomberg, London, 20 October 2015] |
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</ref> how confidential information will be treated by the Designated Platforms who are all small start-up businesses<ref name=":1">{{Cite web|url=http://www.altfi.com/article/2261_bank_referral_scheme_to_go_live_early_next_quarter|title=Bank referral scheme to go live early next quarter|last=Weeks|first=Ryan|date=23 September 2016|website=|publisher=Altfi News|access-date=}}</ref> and the possibility of being contacted by a number of unknown companies<ref>{{Cite news|url=http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/11787286/Referrals-for-bank-jilted-small-firms-still-conspicuously-absent.html|title=Referrals for bank-jilted small firms still conspicuously absent|last=Burn-Callander|first=Rebecca|date=10 Aug 2015|work=|access-date=|via=}}</ref> who have had access to confidential business and financial information. |
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The implementation of the scheme was also been slowed down by multitude of logistical problems such as how and when a bank should refer a business to the [[Alternative financial services|alternative finance]] sector.<ref name=":1" /> |
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== How the Referral Scheme will work == |
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Businesses who have been in a [[credit]] application process with a bank and been declined credit will be asked for their permission to have their financial information passed to a pool of alternative financial platforms whom in a short regulated time-frame can contact the business to offer them alternative loans. Designated Platforms selected are [[Funding Options]], Funding Xchange and Bizfitech. |
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If the business then gets turned down by any of the pool of financial platforms then the business information can be passed to all other financial platforms so they can also contact the business to offer them alternative loans.<ref>{{Cite journal|title=Help to match SMEs rejected for finance with alternative lenders|journal=HM Treasury and Department for Business Innovation & Skills|volume=}}</ref> |
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== Background == |
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| ⚫ | The idea of the bank referral scheme was advocated by the [[Liberal Democrats]] under [[Nick Clegg]] with the former Liberal Democrat [[Secretary of State for Business, Energy and Industrial Strategy|Business Secretary]], [[Vince Cable|Sir Vince Cable]] hinting at it in March 2014.<ref>{{Cite web|url=http://www.altfi.com/events/altfi_europe_summit_2014|title=AltFi Europe Summit 2014|last=|first=|date=|website=|publisher=|access-date=}}</ref> The then [[Chancellor of the Exchequer]], [[George Osborne]] announced in August 2014<ref>{{Cite web|url=http://www.altfi.com/article/0345_referral_system_confirmed_as_government_plans_for_uk_to_rule_the_world_of_fintech/|title=Referral System Confirmed as Government Plans for UK to Rule the World of Fintech|last=|first=|date=|website=|publisher=|access-date=}}</ref> the scheme; after a five-month industry consultation. |
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The scheme which was included in the Small Business, Enterprise and Employment Act 2015<ref name=":0" /> was given [[Royal assent|Royal Assent]] in March 2015 but not expected to be implemented until October 2016. |
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The scheme was launched on on 1 November 2016.<ref>{{Cite news|url=https://www.theguardian.com/small-business-network/2016/nov/01/bank-turned-down-small-business-loan-alternative-funding-referral|title=Bank turned down your small business loan? Now it must offer an alternative|last=Sheppard|first=Emma|date=2016-11-01|newspaper=The Guardian|language=en-GB|issn=0261-3077|access-date=2016-11-02}}</ref> The launch came after months of delay due to logistical issues such as; concerns over some of the Designated Platforms not meeting data protection standards needed by the regulators.<ref>{{Cite news|url=http://www.altfi.com/article/2261_bank_referral_scheme_to_go_live_early_next_quarter|title=Bank referral scheme to go live early next quarter - AltFi News|newspaper=AltFi|access-date=2016-11-02}}</ref> The delay launch came after more than two years of logistical problems<ref name=":1" /> which stalled the commencement of the Scheme. |
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==References== |
==References== |
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Revision as of 17:33, 5 November 2016
The UK government-mandated bank referral scheme was created by the Small Business, Enterprise and Employment Act 2015[1] to support businesses unable to access finance from major UK banks. The scheme was launched in November 2016 after more than two years of deliberation.[2]
The bank referral scheme imposes a statutory duty on selected major UK banks to pass on businesses who have been unsuccessful in applying for finance to designated finance platforms, who will then contact them in order to potentially refer them to suitable alternative finance providers.
Businesses who have been unsuccessful in a credit application process with a bank will be asked for their permission to have their financial information passed to designated finance platforms, who can contact the business in a regulated time-frame. The three designated finance platforms selected are Funding Options, Funding Xchange and Bizfitech[3].
The idea of the bank referral scheme was advocated by the Liberal Democrats under Nick Clegg with the former Liberal Democrat Business Secretary, Sir Vince Cable hinting at it in March 2014.[4] The then Chancellor of the Exchequer, George Osborne announced in August 2014[5] the scheme; after a five-month industry consultation. The British Business Bank (the UK's state development bank) ran the assessment process to recommend three designated finance platforms on behalf of HM Treasury[6].
The bank referral scheme was launched on on 1 November 2016[7].
References
- ^ Small Business, Enterprise and Employment Act 2015 2015 c. 26PART 1Financial information about businessesSection 5
- ^ "Bank referral scheme goes live - AltFi News". AltFi. Retrieved 2016-11-02.
- ^ "New matchmaking service for small businesses looking for finance".
- ^ "AltFi Europe Summit 2014".
- ^ "Referral System Confirmed as Government Plans for UK to Rule the World of Fintech".
- ^ "British Business Bank: Finance Platforms".
- ^ "New matchmaking service for small businesses looking for finance".