BIPA s evidence to the Non- Bank Lending Task Force Call for Evidence 16th February 2012

Transcription

1 BIPA s evidence to the Non- Bank Lending Task Force Call for Evidence 16th February 2012 For any queries please contact:- Mark Preston, Chairman Business Information Providers Association (BIPA) c/o Dun & Bradstreet Ltd Marlow International Parkway Marlow, Bucks SL7 1AJ Tel: Mob: E Mail: prestonma@dnb.com Background & Purpose Business Information Providers Association (BIPA) BIPA was formed in March 2011 following feedback from UK business. We are an Association comprising the five principal Commercial Credit Reference Agencies in the UK Creditsafe, Dun & Bradstreet, Equifax, Experian and Graydon. It operates in a non- competitive way to address issues pertinent to the industry as a whole. Collectively the Agencies facilitate billions of pounds of business decisions each year. Trade Credit is essential to business cash flow and far outweighs bank lending as a source of finance. One of the Association s primary purposes is to facilitate economic growth through the promotion and protection of statutory publicly available data used by the Credit Reference Agencies. This information is essential because it helps to reduce the risk inherent in business transactions; deters fraud; and facilitates the granting of credit. Web site is at

2 BIPA Evidence Following our Initial Views document which was sent to BIS on 27 th January 2012, this paper provides information and evidence in support of BIPA s view that bulk data from the VAT Register in the UK should be placed in the public domain and made available for proper identification of both the corporate and non- corporate business universe to facilitate increased credit and lending for SMEs. The chart on the following page is indicative of the availability of statutory data today in the UK. As the chart shows, there is comprehensive information available for corporate businesses from Companies House supplemented by data from Registry Trust (Register of County Court Judgments) and insolvency actions. For consumers, there is the statutory Electoral Register (Roll) information which is also augmented by data from Registry Trust and insolvency actions. For both, the data made available is a mix of positive and negative data; and for both the entire universe of parties is available for validation and verification. For non- corporate (unincorporated) businesses, i.e. sole traders and partnerships, there is only negative data available in the form of Registry Trust and insolvency actions. There is no positive data available; no universe of businesses; and no means of proper validation and verification. We know that there are 2.8 million businesses on the Companies House index although considerably less than 2 million show evidence of trading. We know that there are approximately 40 million consumers on the electoral roll. We do not know with any degree of certainty the population of unincorporated businesses estimates suggest that this is at least twice as great as the level of trading corporations but here the lack of statutory data in the public domain means that precise numbers are only ever estimates. Within the Credit Reference Agencies that BIPA represents approximately 85-90% of all enquiries from our customers are made on corporate businesses meaning that a small minority of enquiries, no greater than 10-15%, get lodged on those which are unincorporated. In total BIPA members receive in excess of 8 million credit enquiries each year. Walkaways, where a customer makes an on- line enquiry against our databases but does not find the business or make an order, is shown as being twice as great for non- corporate businesses. Even when our customers find the non- corporate business they are looking for the quality of the credit rating or score is often significantly diminished. On average, scores for unincorporated businesses are up to 40% lower due to paucity of data. For these types of business, decisions are generally made on the absence of negative data rather than the existence of positive data.

3 In addition to the lack of data, establishing ratings and scores for non- corporate businesses is made more difficult because we can t be sure what the actual failure rates are for these types of entity. No universe of data exists; no identification of individual businesses is certain...so matching of insolvency events is hit and miss. All of this leads to non corporate SMEs having far reduced opportunities for credit acceptance, access to credit insurance and invoice discounting facilities and other forms of lending. If potential suppliers and lenders can t find out about these businesses they re not going to extend credit or lend to them especially in today s challenging economic environment. The VAT Register As BIPA made clear in its document of 27 th January 2012, the entire business universe is available in some European Countries with VAT data being made available publically and some countries using the VAT number as the basis of business identification.

4 BIPA has no interest in access to tax related data but sees the items contained within the VAT Registration Form as the foundation of an active trading business universe in the UK. This could include:- VAT Number Business Status (i.e. sole proprietor, partnership, corporate, etc) Name and Business Address Contact information telephone, e mail, web- site Business Activities Other business associations in the past 2 years New Registration or ceasing Registration Turnover Date of Establishment Applicants Name & Address When making this data available BIPA would propose adopting principles applied both for the Electoral Register where individuals can opt out of having their data made available for marketing purposes; and for Companies Act legislation pertaining to Directors Usual Residential Address, where the home addresses of Directors are held separately and can only be used by specific organisations for certain approved purposes. The Benefits of this approach There is general acceptance that trade credit, a day to day source of accessible lending, is perhaps 2.5 times the size of bank lending (which has been sized at about 190bn). And yet while banks take increasing steps to validate their customers; ensure they are who they say they are; and restrict lending to the lower risk candidates there are still a huge amount of decisions being made every day by thousands of British businesses to extend open credit to unincorporated businesses of which so little or nothing is known. Inevitably caution reigns and when it doesn t wrong decisions can result. BIPA s proposal to open up the VAT Register opens up the opportunity to extend credit and lending to a far greater population of SMEs than ever before. For those businesses providing these facilities they can have assurances they ve never had before. SMEs will see new credit and loan opportunities become available. 9% increase in the overall level of fraud in 2011 according to a report published by CIFAS on 26 th January 2012 an astonishing 236,500 frauds identified by its members during the year. These are not headlines any of us want to see. Fraud is on

5 the rise BIPA members will testify to this as enquiries about our fraud and severe risk services increase daily. Make the VAT Register available to BIPA members and we can play our part to reduce commercial fraud by giving our customers unique identification of SMEs and positive data they ve never had before. In addition, providing controlled access to information provided by VAT registered businesses will help lenders to comply with anti- money laundering legislation in a more cost effective way. By reducing the operational costs of complying with JMLSG guidance UK government would help lenders offer services to a wider range of SMEs at potentially more competitive rates. BIPA is passionate about the solutions that access to the VAT Register will bring and will be happy to talk further to BIS or its appointed parties to continue to progress this. At all times we remain committed to helping the UK economy to grow profitably and we welcome the opportunity to provide evidence to the Non- Bank Lending Taskforce (the Breedon Review ).