EU Federation for the Factoring and Commercial Finance Industry
EUF
The EUF is the Representative Body for the Factoring and Commercial Finance Industry in the EU.
ID: 39275004756-35
Lobbying Activity
Response to Revision of EU rules on late payments (Late Payments Directive)
9 Nov 2023
As the industry body and voice for the European factoring industry, the EU Federation for the Factoring and Commercial Finance Industry (EUF - EU transparency register no. 39275004756-35) wishes to provide its views and suggestions regarding the Commissions proposal for a regulation on combating late payment in commercial transactions (COM(2023) 533 final), hereinafter referred to as Late Payments Regulation or LPR. The EUF's key messages are: Both the benefits of trade credits and also the financing and liquidity situation of businesses need to be taken into consideration better when trying to combat late payments: Limiting the extent of trade credit between businesses may result in reduced transactions and adjustments of the value chain and financing to the detriment of especially SME; technical, compliance and organizational reasons for payment delays and (temporary) liquidity issues of businesses also need to be taken into consideration more when drafting rules to combat late payments, particularly in the current economically strenuous times. Supportive measures for inter alia factoring, supply chain financing and similar forms of financing as one of the mitigating solutions to the negative effects of late payments must be included in the review of the LPD through the LPR. Such supportive measures for factoring could e.g. limit or prohibit bans on assignments and similar clauses which hinder the use of factoring. Freedom of contract, particularly in B2B-transactions, needs to be ensured and unwanted consequences of restricting procedures of acceptance/verification and payment periods to a maximum of 30 days should be avoided at times by allowing for options to adapt payment terms in B2B-relationships to the specific needs of certain classes of companies, industries or simply the fair and valid needs and wishes of contractual partners; more flexible payment terms should be possible at least in cases where they are granted by suppliers/creditors using a liquidity supporting financial solution such as factoring and who therefore face no liquidity constraints. Instead of introducing LPR enforcement authorities with new (sanctioning) powers, more efficient judiciary and alternative dispute resolution should be fostered and amendments to competition law should be considered to better tackle negative effects or even abuse of asymmetrical bargaining powers. Measures (outside of the LPR, e.g. in the form of stipulations for the use of EU subsidies and similar financial support measures for member states projects) to specifically and effectively address late payments of public authorities should be adopted. In general, the Late Payments Regulation (LPR) proposal should be improved to facilitate its incorporation into the national civil law frameworks - until certain regulatory gaps in the LPR proposal are filled adequately, retaining/amending the current Late Payments Directive (LPD) would be the more suitable legislative instrument. Also, a phase-in approach to ensure a more successful implementation should be envisaged. For more details on our views and suggestions on the proposal for a LPR, please consult the attached EUF position paper.
Read full responseResponse to Revision of EU rules on late payments (Late Payments Directive)
17 Mar 2023
The EU Federation for the Factoring and Commercial Finance Industry (EUF) is the representative body of the European factoring and commercial finance industry and it is as such that the EUF wishes to provide feedback for the revision of the Late Payment Directive (LPD) 2011/7/EU. Unfortunately, the Late Payments Directive of 2011 has not yet led to a significant decrease of late payments in B2B or G2B relations, especially not in the public sector or with public administration (PA) debtors. The analysis of average actual payment times in B2B and B2G relationships shows that the problem of late payments needs to be tackled from a different angle than through overall fixed and stricter maximum payment periods. The EUF rejects the introduction of new and stricter limits and caps on payment periods as these will in practice hardly deter creditors from actually paying late. Rather, the EUF supports introducing actual practical measures to more effectively and easily enforce compliance with already existing (limited/maximum) payments terms. Such practical measures can e.g. relate to the enforcement of debts and in particular late payment interest (including an inflationary adjusted and raised fixed compensation sum for recovery costs) through means for alternate dispute resolution which should also be easily accessible and beneficial for SMEs in particular, or they can entail a clear financial or economic distinction between late payment interests for out of and in court collection proceedings in order to incentivise more timely payments, and a European harmonization of enforcement costs, particularly in cross-border cases. As shown by different studies over the last years, factoring is part of a set of solutions to the problems and negative consequences which businesses (especially SMEs) face due to late payments of their contractual partners, be it in B2B or in B2G relations. The EUF therefore strongly advocates for the removal of the obstacles and hindrances to the uptake of factoring and invoice finance, such as bans on assignment and limiting clauses or laws allowing the debtor to refuse the assignment or conditioning the latter to the debtors consent, in particular when the debtor is a public authority. The EUF also believes that a blacklist of unfair practices would be useful, including the above-mentioned clauses which unduly limit and hinder the use of factoring and similar forms of financing. Moreover, harmonizing and simplifying the formal requirements for a valid transfer or assignment of receivables on EU-level could also support the more widespread use of factoring, especially with regard to B2G transactions where late payments are a key issue for SME business partners. Last but not least, the introduction of monitoring tools such as the collection and publication of data on average payment periods and payment performance could also help foster a culture of prompt payment and be used as a basis for possible future legislative measures, customized to tackle shortcomings that may be detected in specific areas such as e.g. certain industries where late payments are more frequent. For further details, please refer to the attached EUF position paper.
Read full responseResponse to Enhancing the convergence of insolvency laws
17 Mar 2023
Leaseurope and EUF acknowledge that there are differences in national insolvency regimes of EU Member States. As such, Leaseurope and EUF understand, in principle, the need to increase a level of coherence between more efficient and less efficient insolvency legislative frameworks, but also wish to make both more general as well as specific remarks on and suggestions for improvement of the proposed directive. Please refer to the attached joint position paper of EUF and Leaseurope for further details.
Read full responseResponse to Sustainable corporate governance
20 May 2022
The EUF wishes to point out certain aspects in relation to the proposal for a Corporate Sustainability Due Diligence (CSDD) Directive:
The EUF advocates for a clear delineation between regulation and supervision of the real economy and the financial sector and its competent supervisory authorities, also with regard to sustainability. This is in the interest of having an effective, knowledgeable and proportionate regulatory and supervisory system, also for sustainability issues.
The CSDD Directive needs to take into consideration not only traditional trade and banking, but also other forms of financing such as factoring and its specificities. In particular with regard to the understanding of the terms "value chain" and "regulated financial undertaking", the EUF is concerned that the limited definition of “regulated financial undertakings” will create an unlevel playing field in the area of ESG-compliance and sustainability due diligence for the providers of different forms of financing, despite them being regulated (nationally or on EU-level). The level or degree of financial supervision and regulation is irrelevant in this context of sustainability due diligence.
For the EUF's detailed feedback/position paper to the proposal for a CSDD Directive (COM(2022) 71 final), please refer to the attached file.
Read full response22 Feb 2022
The EUF welcomes the opportunity to provide its comments on the proposed amendments to the CRR aimed to finalize the Basel III framework. In this perspective, the EUF believes that the European Commission should consider the following comments and proposals:
• On the definition of “ancillary services undertaking”: to clarify better the Commission’s concerns about “factoring undertakings” out of the scope of prudential consolidation and we consider the inclusion of “factoring” among the “ancillary services” as provided in point (18)(1)(b) as inappropriate.
• On credit insurance: the EUF supports the introduction of the new Article 506 mandating EBA to report to the Commission on the eligibility and the use of credit insurance as a credit risk mitigation technique and on the appropriate risk parameters they should be associated with under the SA-CR and foundation IRB approach, which is fully consistent with the desires of the industry. The EUF also strongly advises to delete the proposal related to fraud by the obligor under amended Article 183(b)(iii) and Article 213(1)(d).
• On purchased receivables: to include in the mandate to the EBA to propose regulatory technical standards not only for the IRB approaches but also under the SA-CR, recognizing the low risk profile of purchased receivables by way of:
o the possibility to consider receivables as eligible CRM tools under the Standardized Approach, thus allowing the possibility to opt for the risk weight of the account debtor, even in the case where the agreement provides partial or full recourse to the client;
o the amendment of art. 178 to allow institutions to apply the definition of default, in the case of purchased receivables, at the level of an individual credit facility (“retail approach”) rather than in relation to the total obligations of a borrower;
o the application of a lower risk weight for exposures to purchased receivables to unrated corporate (or other entities), within the range of 50 to 75%.
Please see the attached paper for more details on the above mentioned (and other) proposals.
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