The Financial Conduct Authority (“FCA“) has successfully applied to the Upper Tribunal to strike out an appeal made by P.F. International Limited (“P.F International“), against the FCA’s variations of the Company’s regulatory permissions, due to its breaches of lending rules.

Background

In July 2018, the FCA issued a First Supervisory Notice notifying P.F. International that the FCA had varied its regulatory permission to prevent the firm from lawfully entering into any regulated credit agreements and credit broking. This took effect immediately and meant that the firm could no longer lawfully offer regulated credit agreements to finance the purchase of vacuum cleaners.

The Notice also had the effect of removing the firm’s permission to exercise its rights as a lender, affecting its ability to collect debts owed to it under existing credit agreements.

In November 2018, the FCA issued a Second Supervisory Notice that confirmed the FCA’s initial decision to remove P.F International’s permission to enter into new agreements, broker agreements and exercise its rights as a lender.

P.F International appealed to the Upper Tribunal against the FCA’s decisions and the FCA moved to strike out the appeal on the basis that it has no prospects of success.

Why did the FCA take this action?

The FCA found that P.F International:

• Sold and brokered regulated credit agreements for the sale and service of vacuum cleaners by “cold call” visits to customers’ homes and high pressure sales techniques applied to vulnerable customers. This was a clear violation of the requirement on its permissions and the FCA’s principle of treating customers fairly.

• Failed to carry out adequate affordability checks on customers’ ability to repay credit. In at least two cases seen by the FCA, the firm entered into consumer credit agreements despite being told by the customers that they could not afford the credit.

• Misled the FCA.

• Had close connections with a firm whose consumer credit license was revoked by the Office of Fair Trading.

The FCA worked closely with both Bristol Trading Standards and the National Trading Standards South-West Regional Investigation Team. The collaboration between the bodies played an important part in allowing the FCA to gather the evidence needed to prevent consumer harm quickly and effectively.

The Upper Tribunal Decision

The Upper Tribunal struck out P.F. International’s appeal of the FCA’s decision. As a result, P.F. International cannot conduct any regulated activity in the UK, including recovering any regulated debts owed to it.

Commentary

It is no surprise that tactics such as door-to-door cold call visits and high pressure sales techniques with vulnerable consumers, amounted to a clear violation of the FCA’s rules. The FCA has an operational objective to secure an appropriate degree of protection for consumers and the firm manifestly failed to follow the FCA’s rules on this.

Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said ‘We intervened early with this firm in order to prevent further harm to vulnerable customers. The firm simply failed to follow our rules and as a result vulnerable customers suffered… Firms should look at the action we have taken and ensure that they are treating their customers fairly, particularly if they are vulnerable.’