A debt purchase and collections firm has agreed with the Financial Conduct Authority (FCA) to provide redress to more than 500,000 customers for historic failures in its due diligence and collections process.
The redress provided by Motormile Finance UK will consist of £154,000 in cash payments to customers and the writing-off of £414m of debt, where the firm has been unable to evidence the outstanding debt balance is correct and owed by customers.
The FCA said Motormile Finance UK, which also trades as MMF and MMF Debt Purchase, had inadequate systems and controls over due diligence.
In particular, the regulator said, it 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.
This in turn led to unfair and unsuitable customer contact for recovery of those sums, the FCA added.
MMF’s chief executive has apologised to all affected customers and explained (see below) that the business was transparent with the regulator during a review of its business.
In February 2015, the FCA appointed a skilled person to conduct a review of Motormile’s existing loan portfolios and collections processes, including its due diligence.
Motormile has since amended its processes, systems and controls to mitigate the risks identified.
Jonathan Davidson, director of supervision – retail and authorisations at the FCA, said: “We have agreed this package, and previous action, to protect the customers of Motormile from unfair practices.
“We have worked closely with Motormile, and are now satisfied with their progress and the way that they will address their previous mistakes.”
He added: “This evidences the importance of conducting sufficient due diligence and how failing to do so leads to poor treatment of customers.”
In August 2016, the FCA authorised the firm after being satisfied that the poor practices at MMF were historical and major changes had been implemented.
These changes included a bespoke new IT system and the appointment of a new chief executive, which the regulator said should be sufficient to ensure compliant standards are maintained.
MMF will contact affected customers by February 2017.
The debt purchaser has also set up a dedicated page on its website to provide further information to customers.
In a response to the FCA’s announcement this morning, MMF said it had sought at all times throughout the skilled person review to be transparent in its dealings with the FCA, and to identify customers who may have been affected by historic processes.
It added that its proposals put forward to the FCA were designed to ensure those customers affected would receive adequate compensation.
Denise Crossley, chief executive at MMF, said: “Working so closely with the FCA has provided MMF with a very clear understanding of what is expected under the new regulatory regime, in comparison to how debt purchase was executed previously.
“I can assure our clients that MMF has embraced this.”
She added: “We apologise to all of the affected customers and we will address the issues through the redress scheme we have agreed with the FCA.
“MMF is now fully authorised by the FCA which is testament to the regulator witnessing first-hand the serious approach we take to our regulatory responsibilities and our desire to treat customers fairly.”
By Marcel LeGouais