Does the FCA Consumer Duty apply to businesses using invoice finance?
The FCA Consumer Duty, introduced in July 2023, applies to products and services provided to retail customers and does not directly govern invoice finance provided to limited companies. Where a provider offers products to sole traders that fall within the consumer credit definition, Consumer Duty obligations could apply to those products. Businesses operating as limited companies dealing with an invoice finance provider are engaged in a commercial relationship and are expected to assess the suitability of the product for themselves.
What this means for your business
The Consumer Duty rules came into force on 31 July 2023 for products open to sale and on 31 July 2024 for closed products (FCA PS22/9). In practice, a limited company should not expect the provider to have tested the facility for fair value or suitability on its behalf: that job sits with the directors. Sole traders are in a different position. If their facility counts as regulated consumer credit, the provider may have Consumer Duty obligations for that product, which can affect how it is presented, priced and supported. Ask the provider directly whether your agreement is regulated.
Key points
- Invoice finance provided to limited companies is treated as a business-to-business relationship, meaning companies must assess product suitability themselves.
- Sole traders using invoice finance may receive Consumer Duty protections if their facility falls within the consumer credit regulatory perimeter.
- Limited companies do not get the same regulatory protections as retail consumers, so review charges, notice periods and recourse terms carefully before signing any facility agreement.
Common pitfalls
A common mistake is assuming that because a product is sold by an FCA-authorised firm, full Consumer Duty protections automatically apply to a limited company. This is not the case. Directors of small limited companies sometimes overlook the fact that they are entering a commercial agreement with fewer built-in protections than an individual consumer would receive.
Sole traders should check whether their facility is regulated under consumer credit rules, as this determines whether Consumer Duty obligations are relevant. Failing to read the facility agreement thoroughly, or not seeking independent advice, can leave businesses exposed to unfavourable terms they assumed were regulated away.
Related questions
Does being FCA-regulated mean an invoice finance provider must follow Consumer Duty rules for all clients?
Not necessarily. An FCA-authorised invoice finance provider must follow Consumer Duty rules only in relation to products offered to retail customers. Where the client is a limited company, the relationship is commercial and Consumer Duty obligations do not apply to that part of the business.
Are sole traders treated differently from limited companies under FCA rules for invoice finance?
Yes, they can be. If a sole trader takes out a facility that falls within the consumer credit definition, the provider may have regulatory obligations under Consumer Duty that do not apply when dealing with a limited company. Sole traders should check with their provider whether their specific facility is regulated under consumer credit rules.
What protections do limited companies have when entering an invoice finance agreement if Consumer Duty does not apply?
Limited companies rely on contract law and the terms negotiated in the facility agreement rather than consumer protection regulation. It is important for directors to review all terms carefully, seek legal or financial advice if needed, and ensure they understand charges, notice periods and recourse obligations before signing.
Founder & Managing Director, Muswell Rose, founder and PSC of Best Business Loans Ltd
Adam is the founder and managing director of Muswell Rose and a founder of Best Business Loans Ltd, the company behind Market Invoice. He spent over three years as managing director of Penny, a UK invoice finance business, and his career runs through insurance, mortgages, commercial finance and fintech lending. He writes the Market Invoice library.
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