Four business organisations have written to the Home Office Minister George Howarth urging him to amend the Data Protection Bill currently going through the Commons.
The problem is that a clause in the bill would prevent those who provide credit references for small businesses from keeping their identity confidential. Credit rating agencies fear that this will deter companies from giving references for small businesses, thereby making it more difficult for them to raise finance.
Identical letters, signed by the Finance and Leasing Association, the British Retail Consortium, the British Institute for Credit Management and the credit rating agency Dun & Bradsteet, were sent to Mr Howarth last week.
Copies of the letters have also been sent to the Minister for Small Firms, Barbara Roche, and the Economic Secretary to the Treasury, Helen Liddell.
The letter says that if providers of credit references cannot be assured of their confidentiality, "it is likely that in such circumstances many referees will either decline to give a reference at all or will not give a meaningful reference. The most obvious risk is that, if they make any negative statement, they will at best prejudice their relationship and at worst face a libel action.
The letter points out that, unlike large companies, most sole traders and partners do not publish accounts or have them audited so there are few sources of published information.
" Giving them credit without references would be a risky proposition for most suppliers, banks and other financial institutions. The problem is, therefore, that many small businesses may no longer be able to obtain credit at all, to the obvious detriment of their livelihood."
The Data Protection Registrar, Elizabeth France, has been alerted to the anomaly in the legislation and is not thought to oppose the idea of credit referees retaining their anonymity.
The organisations that have written to the Home Office stressed that there are not seeking to be confrontational. Rather, they see the problem as an unintended consequence of the planned change to the data protection law.
Martin Hall, director general of the Finance and Leasing Association, said: "The effect of the bill would be to deliver another blow to small businessmen, albeit an unintentional one."
A spokeswoman for the British Retail Consortium said it was confident that the law would be amended.
A director of one credit rating agency said: "While the aim of the Data Protection Bill is to help people by giving them access to more information about themselves, the reverse will be the case so far as references are concerned. There is a real concern that the information we need will dry up."
The letter points out that there is already a let-out under present legislation. The Consumer Credit Act 1974 allows the Director General of Fair Trading to exempt the disclosure of certain information such as the name of credit referees.