Banks accused of ‘fleecing’ customers

With the UK interest rates held at an unprescedented 0.5% for the 18th consecutive month, more and more critiscism is being directed towards the banks and accusations of ‘fleecing’ are as popular as ever.

That the UK sustained an incredible economic melt down is not a point up for discussion. That the banks were, just like the rest of the UK, hit very hard is also not a point for discussion as the facts remain plain for all to see. Banks are businesses, and they are allowed to be profitable, that’s how business works, and the UK public and businesses don’t argue this. Yet when a closed market, like the UK banking industry is which is largely uncompetitive and unresponsive to market forces and demand as it currently is, questions need to be asked about whether the balance of power is so firm in the banks favour, that the consumer is being disadvantaged?

Banks according to recent press are ‘fleecing’ their most cash-strapped customers by charging record overdraft rates which hit a new high last month, averaging 19.1 per cent. All of this, despite the Bank of England keeping interest rates at a 300-year low for the last 18 months.  The worst offenders were NatWest and Royal Bank of Scotland, in which the taxpayer holds an 84 per cent stake of the combined RBS Group.

In addition, margins on other ‘credit’ services such as credit cards, loans and mortgages have soared while high street banks have enjoyed a surge in profits to £15billion in the first six months of the year.  Both private consumers and small businesses are being hit very hard at the time they need flexibility the most.

For the Invoice Finance industry, this is certain a boom period. Whilst overdrafts are increasingly harder to find, and the ones that are offered to small businesses being too restrictive or requiring excessive security (such as a charge on a property) many businesses have sought alternative commercial finance sources and products such as Invoice Factoring and Invoice Discounting are as popular as ever.

The benefit Invoice Factoring and Invoice Discounting have over overdrafts and loans is that the security is only against the value of a company’s invoices with which the client wants to factor. Typically, businesses raise their sales invoices as normal and irrespective of the 30,60, or 90 day invoice terms they offer to their customer, the factoring provider advances up to 90% of that invoice value typically the next working day.

Where circumstances may change and leave a business with cash flow problems and unable to pay its overdraft or loan if sales fall, and thus put the business and its security at risk, with Invoice Factoring and Invoice Discounting there are no such issues. The factoring provider advances funds only against current invoices so if sales fall, there is no ballooning debt mountain.

Factoring Finance have an extensive UK wide broker network and being independent we find the deal best for you, not the factoring provider so if you are fed up being ‘fleeced’ by the banks with excessive overdraft fees and security demands perhaps its time to line your pockets and not the banks?

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