Three companies in the debt management sector lost their Consumer Credit Licences in October 2013. In all three cases, consumer credit regulator the Office of Fair Trading (OFT) had already announced their intentions to revoke or not to renew the licences as a result of the firms’ practices. In the case of two of the firms, their licences were terminated after they withdrew their appeals against the initial OFT ruling, while the third firm lost its appeal.
Stockport-based First Step Finance (FSF) was initially informed by the OFT in November 2012 that it was minded to revoke its licence. The OFT identified serious concerns with the firm’s marketing material and other information provided to clients, particularly with regard to disclosure of risks and charges. FSF initially announced it would appeal the decision, but then decided to accept the ruling. The firm was then allowed by the OFT to continue trading for a short period, subject to conditions, in order to facilitate an orderly wind down of its business. FSF’s debt management business has now been transferred to Debt Help & Advice Ltd, although the company continues to trade as a payment protection insurance claims manager under the jurisdiction of the Ministry of Justice.
Lancashire-based Welcome Solutions Ltd, which traded as debtsorters.co.uk, also announced it was withdrawing its appeal. The OFT found in January 2013 that Welcome was incorrectly suggesting it provided a free service, was not providing risk warnings on its advertising material and had provided false client testimonials.
Manchester-based Debt Connect (UK) Ltd lost its licence after the First Tier (Consumer Credit) Tribunal upheld the OFT’s January 2013 ruling that the firm’s licence should not be renewed. Debt Connect was said to have provided “misleading and inaccurate information” to its customers. The Tribunal said that Debt Connects Managing Director, Mr Sharma, had “insufficient skill, knowledge and experience.” The licence of associated company Connected Claims Ltd has also been removed.
This illustrates just how important it is for consumer credit firms to meet their regulatory obligations, especially regarding the fair treatment of customers. From April 2014, when consumer credit regulation transfers to the Financial Conduct Authority (FCA), they will be subject to greater scrutiny. The FCA has more resources than the OFT to supervise firms and can impose a wider range of penalties.
Commenting on the matter, David Fisher, OFT Senior Director of Consumer Credit, said: “These results are the latest in our continuing efforts to improve practices across this sector. We expect businesses in the debt management sector to behave with integrity and treat their customers fairly. They must be transparent about the service they are selling, making clear to prospective customers the costs they will incur and the risks they take. We will not hesitate to revoke the licences of debt management businesses that fail to do so.”