This month saw the publication of the long awaited Secured Lending Reform Bill (the Bill), a private member’s bill, which is intended to curb the power of bank lenders when a borrower’s company gets into difficulties. However the Bill is subject to a second reading debate in the House of Commons before it can come into action and this reading has once again been delayed.
The Bill’s second reading was originally scheduled to take place in December but was postponed until January. It has now been further delayed until 4 March 2011, leaving many frustrated and disconcerted.
If the Bill is passed it will ensure that certain instances of injustice towards small businesses and borrowers by the bank are eliminated completely.
Currently, banks are able to exploit a legal loophole which gives them the power to demand an unreasonable level of access to any business or personal property which has been put down as security for a secured loan.
This power has led to a multitude of horror stories where small business owners have been branded trespassers on their own land and forced to leave, because the bank has enforced their hold over it.
The Federation of Small Businesses (FSB) is supporting the Bill, in the hope that this legal loophole will finally be closed.
John Walker, National Chairman, Federation of Small Businesses, said: "The most commonly expressed concern from our members over the past few years has been that of their relationship with their bank. Viable small businesses have been refused loans and overdrafts and have increasingly been asked by their banks for more security, including the marital homes.
"In the face of high levels of public sector unemployment, Government needs to do what it can to encourage entrepreneurs to start up their own businesses without having to put at risk the family home. This Bill will not cost the Government a penny but will help small businesses who are being treated unfairly as a result of the banks exploiting loop holes.”
Back in October 2010, George Justice MP was also keen to set things into motion and press on with passing through the Bill and helping small businesses.
George Justice MP said: "If we want to rebalance our economy then first we must rebalance the law in favour of enterprise. The Secured Lending Reform Bill would protect the economic recovery and safeguard the buy-to-let market by preventing sharp practice in the banking industry. It would give small businesses the same rights currently enjoyed by homeowners and it would return the role of receivers to that envisaged in the original 1925 Law of Property Act.
"At the moment banks can and do send in receivers to seize and sell the property of hard working entrepreneurs without even having to obtain a Possession Order from the courts. That must change. Under these proposals, Banks will not be entitled to take possession of a business property unless they have a Possession Order from the Courts first and the Courts will not grant such an order until other counter-claims or disputes between the borrower and lender have been resolved. This improvement to the law is long overdue."
Yet three months on from George Justice MP’s bold statement and his inspiring dreams, small businesses are no further forward to having the Bill passed, as the Private members bill is still subject to the House of Common’s reading before it can be of any practical use.
Furthermore there seems to be no clear explanation as to why this reading has been delayed twice.
By Katie-Jill Rowland
