ICM urges Government to be clearer on key late payment issue
Press Release – 30 May 2014
Institute says BIS has ‘ducked the issue’ regarding ‘grossly unfair’ terms
The Institute of Credit Management (ICM) has welcomed the Government’s commitment to working with it in further strengthening the Prompt Payment Code (PPC) and plans for a new robust reporting framework that focuses on the needs of suppliers.
But the ICM says that it is disappointed that the Department for Business, Innovation and Skills (BIS) has once again ‘ducked the issue’ regarding the rights of business to challenge ‘grossly unfair’ terms by failing to define what grossly unfair terms might be.
Responding to BIS’ response to the Building a Responsible Payment Culture consultation published today (May 30), Philip King, Chief Executive of the ICM, says the Government is right not to be setting a maximum payment term of 30 days (outside of the public sector) but wrong not to be clearer on when such terms are unfair: “What is critical is the certainty of payment, more than being caught in arguments over 30 or 60 day terms,” he says.
“But there clearly comes a point when the terms of payment should be deemed unfair, for example when they are imposed by the buyer without consultation or negotiation, when they are retrospectively applied to contracts already in place, and/or where they are demanded in circumstances that will clearly be to the detriment of the supplier and exploiting the weakness of his bargaining position. We articulated this view in our official response, but it appears the issue has been ducked.”
Mr King says it also seems that the Government has missed the opportunity of clarifying the situation whereby ‘organisations officially recognised as representing undertakings, or organisations with a legitimate interest in representing undertakings may take action…on the grounds that contractual terms or practices are grossly unfair…’
“This clause (article 7.5) is in the EU Directive (2011/7/EU) but does not appear to be reflected in the regulations (Statutory Instrument 2013 number 395). This clause would allow business organisations to challenge unfair contract terms without jeopardising individual supplier contracts/relationships and is vital to the successful implementation of the recast directive,” he adds.
A flagship of the Government’s fight against late payment is the Prompt Payment Code, hosted and administered by the ICM, and Mr King is pleased to see that support for the Code will be strengthened. “The Government says it will look in more detail at various proposals to increase the accountability of signatories, and to work with the ICM in promoting examples of best practice,” Mr King adds.
He is also pleased with the Government’s proposals regarding closer ties with industry and sector bodies to develop new codes of best practice – an approach that recently led to the launch of a new Construction Supply Chain Payment Charter engineered by the ICM.
The ICM similarly welcomed the recommendation not to increase the penalties for late payment, but rather to better implement and enforce those measures that already exist.
Mr King is urging businesses to engage fully in the ongoing debate that will now follow: “We need to understand that ‘Building a responsible payment culture’ requires businesses to respond, and I would urge all companies, large and small, to ensure their voices are heard.”
But, he says, in many ways, the ‘silver bullet’ to improving the speed and certainty of payment already exists: “Of course late payment is an issue, and perhaps it always will be, but its impact can be significantly reduced through good credit management.”
About the ICM
The Institute of Credit Management (ICM) is Europe’s largest credit management organisation, and the second largest globally. The trusted leader in expertise for all credit matters, it represents the profession across trade, consumer and export credit, and all credit-related services. Formed over 70 years ago, it is the only such organisation accredited by Ofqual and it offers a comprehensive range of services and bespoke solutions for the credit professional as well as services and advice for the wider business community, including the acclaimed ICM/BIS Managing Cashflow Guides (www.icm.org.uk).
For news, views and updates, follow the ICM on Twitter at www.twitter.com/ICMorg.
For further press information, please contact:
Sean Feast or Alex Simmons, Gravity Public Relations, 0207 330 8888, email email@example.com