Motormile Finance UK Ltd, a debt and collections firm, has entered into an agreement with the FCA to provide redress to more than 500,000 customers for failures in its due diligence and collections process
The FCA stated on Wednesday in its press release that Motormile had inadequate systems and controls over due diligence. Motormile failed to conduct sufficient due diligence upon the purchase of a debt portfolio to be satisfied that the sums due under customer loan agreements were correct, which led to unfair and unsuitable customer contact for recovery of those sums.
The redress consists of £154,000 in cash payments to customers and the writing-off of £414 million of debt where Motormile is unable to evidence the outstanding debt balance is correct and properly due. Motormile is required to contact affected customers by February 2017.
The FCA authorised Motormile in August 2016 after being satisfied that the identified poor practices were historical and that the firm had implemented changes, including installing a new IT system and appointing a new chief executive officer, that should ensure that compliance standards are maintained.
This case demonstrates that the FCA will be proactive and intervene where it identifies conduct risk and has broad powers under the Financial Services and Markets Act 2000 to require a firm to establish and operate a consumer redress scheme. In 2013, then FCA Chief Executive, Martin Wheatley said that firms must encourage a more consumer-centric approach to their business and work on their culture "at every level and every stage", including ensuring senior management are accountable. In this context, he commented that the financial services industry needed to "move faster to get redress where it is justified". This most recent case also illustrates the signifcant costs to business where such a scheme is required.