In January 2016, the Financial Conduct Authority (FCA)announced it had refused an application from Edgware, Middlesex-based firm Money Clinic Debt Management Limited, who carried out debt counselling, debt adjusting and credit broking activities. The firm previously held interim permission from the FCA following the transfer of regulation from the Office of Fair Trading.
The firm failed to make any representations in reply to the FCA’s Warning Notice of October 2015, when the regulator said it was minded to refuse the application.
The reasons why the application was refused include:
• The fact that for 76% of its customers, the firm charges fees of more than 50% of the monthly repayment, thus increasing customers’ debt burden by up to 15%. One customer was paying 81% of their repayments in fees. The firm did not act as a debt manager in the traditional sense, in that it did not set up debt management plans. Instead, customers made payments direct to creditors under revised terms that Money Clinic had negotiated on their behalf. This means the firm was not subject to the same specific rules as debt managers are, i.e. the requirement in CONC 8.7.2 to ensure the fees are not so large that they affect the customer’s ability to make repayments, yet the FCA still concluded that Money Clinic’s fee structure was not in the interests of their customers.
• The firm’s failure to respond to requests for information from the FCA
• Its failure to put in place locum arrangements should the sole director and 100% shareholder, Ronald Golding, be absent
• Its failure to inform the FCA that it ceased trading in July 2015. This came to light when Mr Golding wrote to the FCA in December 2015, informing them that the firm had ceased trading and asking to withdraw the application. The FCA did not accede to the withdrawal request as it had already commenced the enforcement process.
• The fact that the firm could not satisfy the FCA’s prudential resources requirement. For the last three complete financial years before the authorisation application was made, the firm declared annual profits of £71, £161, and £81 and the FCA was not satisfied that it could meet the requirement to hold resources of £5,000. The firm’s application did not evidence that they had considered this issue
• The firm not being able to supply copies of pre-contractual information provided to customers
• Concerns over the quality of the firm’s debt advice. The FCA reviewed three customer files, all of which were for customers whose disposable income was negative. If a client does not have sufficient disposable income to pay the firm’s fees, then they should be referred to a not-for-profit debt advice agency instead. The regulator also found a number of customers who would have taken hundreds of years to become debt free under the repayment strategies that Money Clinic had arranged for them
The firm thus failed to satisfy as many as four of the FCA’s Threshold Conditions.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.