The Financial Conduct Authority (FCA) has today banned Adrian and Christine Whitehurst, former directors of debt management firm First Step Finance Limited (now dissolved), for dishonestly misappropriating client money.

Over 4000 customers lost a total in excess of £6m as a result of their actions.

Between them, the Whitehursts ran First Step Finance, a debt management company licensed by the Office of Fair Trading (OFT) from 2007 to 2013, until the OFT revoked First Step’s licence taking effect in October 2013. The OFT found that First Step had deceitful, oppressive, improper and unfair business practices. The FCA took over the regulation of consumer credit in April 2014 and has now banned the Whitehursts from any involvement in regulated financial services activity. The FCA has also referred the Whitehursts to the City of London Police, who are considering the matter.

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. First Step received monthly payments from their customers, who were told that the money would be held in a ring-fenced account (as required by the OFT).

However, the Whitehursts in fact used clients’ money to fund their businesses and a luxurious lifestyle.  They spent over £500,000 on holidays, bars and restaurants, including stays at five-star luxury hotels in Marbella, Venice, Vienna and Greece; over £200,000 on luxury motor vehicles, including a Bentley, a Range Rover and a Ducati; and significant sums on luxury brands, including goods from Hermes and Louis Vuitton. Over £1m of cash was transferred to Mr Whitehurst for his personal use. In addition, over £1m of client money was used for the benefit of firms associated with the Whitehursts and over £2.2m of client money 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.

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.”

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.

The FCA has consistently focused on debt management as a high-risk area for consumers since 2014, and a large number of firms have left the market in that time, while others have taken steps to improve their practices and processes to meet the standards required.  To date, no firm operating the ‘full and final settlement’ model used by First Step has been authorised by the FCA.