Former debt management directors have been banned by the Financial Conduct Authority (FCA) for dishonestly misappropriating client money.
The watchdog last month published details of how the directors of First Step Finance, a company now dissolved, left 4,000 of their customers with combined losses of more than £6m.
First Step Finance was run by Adrian and Christine Whitehurst between 2007 and 2013 before their licence was revoked by the Office of Fair Trading (OFT) in 2013.
The OFT found the company had deceitful, oppressive, improper and unfair business practices. After discovering this information, the FCA has banned the Whitehursts from any involvement in regulated financial services activity and referred them to the City of London Police, who are considering the matter.
The FCA said First Step’s clients were largely vulnerable individuals who went to the firm for help to pay off their debts.
The firm told customers that it would build a pot of money for each customer and that it would use this pot to make a full and final settlement of their debts with the customer’s creditors.
"The firm’s customers are unable to recover their money as these losses are not covered by the Financial Services Compensation Scheme, and as such were left with continuing debts."
First Step received monthly payments from their customers, who were told that the money would be held in a ring-fenced account.
However, the Whitehursts used clients’ money to fund their businesses and a luxurious lifestyle. More than £1m of cash was transferred to Adrian Whitehurst for his personal use, more than £1m was used for the benefit of firms associated with the Whitehursts and more than £2.2m was used to fund First Step’s expenses.
The firm’s customers are unable to recover their money as these losses are not covered by the Financial Services Compensation Scheme, and as such were left with continuing debts.
The ban imposed by the FCA is the strongest sanction available in this case, as the Whitehursts’ conduct took place before the responsibility for regulation of consumer credit was transferred to the FCA.
Mark Steward, executive director of enforcement and market oversight, said: “The Whitehursts were trusted by their customers, who were extremely vulnerable, to help them with their debt problems. They abused this trust, living a luxury lifestyle at the expense of people who could not afford to lose their money.
“They showed complete disregard for the consequences of their actions and we have taken the strongest action possible in preventing them from operating in financial services again.”