The perils of non recourse factoring

Two reports in the same week concerning one of the well known high street bank owned factoring companies and their non recourse facilities.

One of their factoring clients suffered a reasonably substantial five figure bad debt which was underwritten by the factoring company and as a result the factoring company reduced the credit limits on the remaining customers refusing to fund any account in excess of the new limit. The company found it difficult to survive on the reduced funding levels so looked to move to a more flexible factoring company only to be told that if they moved the bank wouldn’t pay out on the bad debt.

It seems that the same bank owned factoring company also claim that if their client enter Administration or CVA then the cover on all bad debts that are currently in the system will be automatically invalidated.

Unethical in my view

 

What do you think?